Innovative Finance, Technological Adaptation and SMEs Sustainability: The Mediating Role of Government Support during COVID-19 Pandemic

Abstract

Small and medium enterprises (SMEs) survival is critical for economic sustainability due to the multifaceted role of the economy. Thus, halting SMEs operation hurts the aggregate economy. During the present pandemic, SMEs’ sustainability in Bangladesh is under-challenged because of limited market demand, supply constraints, financial incapacity, and capital restrictions. However, with the concerted effort from firms and the government, SME’s have been trying to reestablish from the unforeseen consequence by capitalizing on innovation, skills, and economic resources. The motivation of the study is to gauge the impact of innovative finance, technological adaptation, and the government’s role on SMEs’ sustainability during the COVID-19 pandemic in Bangladesh. As a study sample, 2000 SMEs were considered for data collection through a structured questionnaire from 10 December 2020, to 28 January 2021. A sample of 1895 SMEs was returned with their responses. However, after a careful data cleaning procedure, only a sample of 1395 (69.75%) responses was found suitable for study. The study applied structural equation modelling to explore causal effects and test the proposed hypothesis for the hypnotized model, i.e., more precisely, to explore the direct effects of technology adaptation and innovative finance and indirect effects through government support on SMEs. Study findings revealed that SMEs’ sustainability positively accelerates by applying innovative finance and integration of technological adaptation. In contrast, the mediating role of government was also established with indirect assessment. Study findings suggest that policy formulation and implementation must be initiated, focusing on effective online financial services, settling business transactions, and integrating IT advancements in operation.