Effect of financial access and entrepreneurial characteristics on the performance of small and medium enterprises (SMEs) in a Felda scheme in Pahang

Abstract

Despite the significant contribution of SMEs entrepreneurs in the FELDA scheme towards the rural economic development, several studies report that both access to finance from financial institutions and entrepreneurial characteristics are among the problems affecting SMEs business performance. Little is known to what extend government business support intervene the relationships between access to finance, entrepreneurial characteristics and SMEs business performance in the FELDA scheme. This study investigated the effect of access to finance and entrepreneurial characteristics (innovativeness, proactiveness and risk taking) on the performance of SMEs in a FELD A scheme in Pahang, and also determined whether these effects are moderated by entrepreneurial characteristics ( age and working experience) and finn characteristics (types of business, years of business operations and annual sales). In addition, this study examined the mediating role of government business support in the relationships between access to finance and entrepreneurial characteristics (innovativeness, proactiveness and risk taking) on business performance. The study employed a cross-sectional survey and quantitative methodology. The analysis of this study was based on a sample survey consisting of 368 SMEs in a FELD A scheme in Pahang. The survey data were analysed using the IBM Statistical Social Science (SPSS) software and the AMOS Structural Equation Model (SEM) Analysis. SEM is employed to examine the interrelationship between access to finance, entrepreneurial characteristics, government business support and SMEs business performance. The results show that the effects of access to finance, innovativeness and proactiveness on business performance are not significant, while risk taking positively and significantly predicts business performance of SMEs in the FELDA scheme in Pahang. Furthermore, the results found that there is no difference between entrepreneur characteristics ( age and working experience) and firm characteristics (types of business, years of business operation and annual sale) with respect to the relationships between access to finance, innovativeness, proactiveness, risk taking and business performance. This study further revealed that government business support partially mediated the relationship between risk taking and business performance. Government business support fully mediated the relationships among access to finance, innovativeness and business perfonnance, whereas government business support had no mediation effect between proactiveness and business performance. These findings imply that government business support indirectly influence SMEs' business performance. More importantly, the results indicate the important role of government business support in easing financial access and improving SMEs capabilities in the FELDA scheme particularly in Pahang. Finally, the findings of this study provide practical implications to government agencies in redesigning SMEs entrepreneurial development pro grammes toward improving SM Es business performance in the FELDA scheme.