Financial technology can significantly boost the environmental performance of small and medium-sized enterprises (SMEs) in Pakistan’s manufacturing sector. However, this boost only arises when coupled with organisational innovation and access to green finance, according to new research in the International Journal of Business Innovation and Research. The work has looked at the pressures facing SMEs with limited resources in emerging economies in this context.
The research used data from 340 manufacturing SMEs in Pakistan and found, using structural equation modelling, that those companies adopting digital financial tools, fintech, showed clear improvements in sustainability performance. This is a broad measure covering cleaner production methods, reduced waste, and more efficient use of resources.
The structural equation modelling can tease out complex causal relationships, and so was able to determine how fintech interacts with internal innovation practices and environmentally focused financial instruments. The researchers thus found that technology alone was insufficient to boost SMEs, but its effects were strongest when it prompted firms to redesign processes, improve transparency, and make operational decisions based on real-time data.
The team adds that access to green finance, such as loans linked to sustainability efforts or green bonds, was just as important. Such financial products, earmarked for environmental improvements, are usually out of reach of many SMEs because of limited collateral or weak reporting systems. Their use of fintech helps them overcome such barriers by standardising data, streamlining due-diligence checks, and widening the pool of potential lenders.
As a result, firms using digital financial tools were better able to secure funding for cleaner technologies that they could not otherwise afford. Organisational innovation and green finance affect the link between adopting fintech tools and sustainability outcomes. This means that technology improves environmental performance partly by enabling these other capabilities. Conversely, fintech itself mediates the relationship between green finance and sustainability, acting as the mechanism that converts earmarked funding into measurable environmental gains.
Rashid, S., Ejaz, S., Alwadi, B.M., Kumar, A., Ejaz, F. and Hossain, M.B. (2025) ‘Linking financial technology, innovation, and green finance to drive sustainable performance of SMEs of Pakistan’, Int. J. Business Innovation and Research, Vol. 38, No. 6, pp.30–54.
No comments:
Post a Comment