INNOVATIVE FINANCIAL STRATEGIES FOR SMALL AND MEDIUM ENTERPRISES (SMES) GROWTH: A MIXED METHOD STUDY

Abstract

Small and Medium Enterprises (SMEs) are essential contributors to economic growth worldwide. However, limited access to finance remains a significant constraint to their growth. This study explores the financing sources of SMEs and proposes innovative financial strategies for their growth and sustainability. A mixed-method research design was adopted, and structured questionnaires were used to collect data from SME owners and managers in different districts. The study investigates both quantitative and qualitative finance sources for SMEs and their preferred business uses. The findings indicate that SME financing preferences change as the business grows. At the startup stage, SMEs rely on personal savings and financial support from immediate family members. However, after two years of economic viability, SMEs increasingly depend on financial institutions for funding. The study proposes project financing and trade trust financing models as innovative sources of funding for SMEs, considering the progress in artificial intelligence, the implementation of the 4th industrial revolution, and the reduced distance through social media. The study also addresses the challenges faced by SMEs in financing their operations and proposes optimal financing models for governments, private sectors, and regulators to support the growth and sustainability of SMEs. The proposed models will enhance SMEs' access to funding for growth and job creation, particularly in the post-Covid-19 recovery period. In conclusion, this study highlights the importance of innovative financing strategies for SMEs' growth and sustainability. The proposed financing models provide SMEs with untapped sources of funding and ease their access to funding for growth and job creation. This study's results can guide SME owners and managers, policymakers, and regulators in implementing optimal financing models to support SME growth and sustainability.