Green Finance Accessibility and Sustainable Economic Development: The Roles of Financial Literacy, Green Investment Capability, and Institutional Support

Sabri; Anne Putri; Heliyani; Febriyan Pratama  Defaz; Riza Novelda

doi:10.62794/je3s.v7i5.625

Authors

Sabri Institut Teknologi dan Bisnis Haji Agus Salim Bukittinggi, Indonesia
Anne Putri Institut Teknologi dan Bisnis Haji Agus Salim Bukittinggi, Indonesia
Heliyani Institut Teknologi dan Bisnis Haji Agus Salim Bukittinggi, Indonesia
Febriyan Pratama Defaz UIN Sjech M. Djamil Djambek Bukittinggi, Indonesia
Riza Novelda Dinas Lingkungan Hidup Pemerintah Kota Bukittinggi, Sumatera Barat, Indonesia

DOI:

https://doi.org/10.62794/je3s.v7i5.625

Keywords:

Financial Literacy, Institutional Support, Green Financing Accessibility, Green Investment Capability, Sustainable Economic Development

Abstract

Access to green financing remains a challenge for micro, small, and medium enterprises (MSMEs), particularly in developing environmentally friendly investments and supporting sustainable economic development. This study aims to analyze the influence of financial literacy and institutional support on green financing accessibility, green investment capability, and sustainable economic development, including the mediating role of these two variables. The study used a quantitative approach with an explanatory cross-sectional survey design. Data were collected through purposive sampling from 300 MSME owners or managers and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4. All eight tested direct paths were positive and statistically significant. Financial literacy and institutional support were positively associated with green financing accessibility and green investment capability, while institutional support, green financing accessibility, and green investment capability were positively associated with sustainable economic development at the MSME level. Financial literacy and institutional support increase green financing accessibility and green investment capability, while institutional support, green financing accessibility, and green investment capability contribute positively to sustainable economic development. The mediation analysis also shows that green financing accessibility and green investment capability act as significant indirect pathways. This study broadens understanding of the interrelationships between financial literacy, institutional support, green financing, and green investment in supporting the economic sustainability of MSMEs. Practically, these findings emphasize the importance of improving financial literacy, facilitating access to green financing, and strengthening environmentally friendly investment capabilities

References

Achmad, F., & Wiratmadja, I. I. (2025). Organizational performance and competitive advantage in SMEs: The role of green innovation and knowledge management. Journal of Open Innovation: Technology, Markets, and Complexity, 11(2), Article 100532. https://doi.org/10.1016/j.joitmc.2025.100532

Adomako, S., Danso, A., & Ofori Damoah, J. (2016). The moderating influence of financial literacy on the relationship between access to finance and firm growth in Ghana. Venture Capital, 18(1), 43–61. https://doi.org/10.1080/13691066.2015.1079952

Chin, T. L., Amy, Y. C. M., & Ling, C. P. (2026). Growing success with sustainable business practices among small and medium enterprises (SMEs): A resource orchestration theory perspective. Sustainable Development, 34(S1), 523–537. https://doi.org/10.1002/sd.70189

Cong, N. N., Do Thi Thuy, P., Mai, L. N. T., Thi, N. P., & Thi, H. H. (2026). Green transformation in small and medium sized enterprises: A systematic literature review toward an integrated capability ecosystem framework. Discover Sustainability. https://doi.org/10.1007/s43621-026-04903-1

Ekayani, N. N. S., Kartana, I. W., Putra, I. M. W., Diviariesty, K., Darma, D. C., & Setini, M. (2024). The mediating effect of access to capital in the impact of financial literacy and financial inclusion on SME sustainability. Journal of Corporate Finance Research, 18(4), 136–151. https://doi.org/10.17323/j.jcfr.2073-0438.18.4.2024.136-151

Fachrurazi, Rukmana, A. Y., Sutrisno, & Efendi (2023). Achieving access to external finance among Indonesian entrepreneurs through financial literacy, financial inclusion, availability of collateral, and government policy: A study on large industrial entrepreneurs in West Java. The ES Accounting and Finance, 1(2), 61–71. https://doi.org/10.58812/esaf.v1i02.63

Fu, C., Lu, L., & Pirabi, M. (2024). Advancing green finance: A review of climate change and decarbonization. Digital Economy and Sustainable Development, 2(1), Article 1. https://doi.org/10.1007/s44265-023-00026-x

Goyal, M., Aggarwal, R., & Goyal, K. (2025). Financial literacy and the sustainability of small firms: Fintech as a mediator. Sustainable Development, 33(6), 8669–8681. https://doi.org/10.1002/sd.70114

Graña-Alvarez, R., Lopez-Valeiras, E., Gonzalez-Loureiro, M., & Coronado, F. (2024). Financial literacy in SMEs: A systematic literature review and a framework for further inquiry. Journal of Small Business Management, 62(1), 331–380. https://doi.org/10.1080/00472778.2022.2051176

Han, L., & Liu, S. (2023). How does green credit policy affect sustainable development capacity of enterprises in China?. Journal of Global Information Management, 31(1), 1–19. https://doi.org/10.4018/jgim.320487

Hasbi, H. (2025). The impact of renewable energy and green finance on SMEs sustainability through environmental management practices. Jurnal Ilmiah Manajemen Kesatuan, 13(6), 5271–5284. https://doi.org/10.37641/jimkes.v13i6.4385

Khan, A., Giakoumelou, A., & Bertinetti, G. S. (2026). SMEs and climate finance: A hybrid review. Journal of Economic Surveys, Article joes.70106. https://doi.org/10.1111/joes.70106

Khan, M. A., Riaz, H., Ahmed, M., & Saeed, A. (2022). Does green finance really deliver what is expected? An empirical perspective. Borsa Istanbul Review, 22(3), 586–593. https://doi.org/10.1016/j.bir.2021.07.006

Khanra, S., Kaur, P., Joseph, R. P., Malik, A., & Dhir, A. (2022). A resource-based view of green innovation as a strategic firm resource: Present status and future directions. Business Strategy and the Environment, 31(4), 1395–1413. https://doi.org/10.1002/bse.2961

Kurniasari, F., Abd Hamid, N., & Lestari, E. D. (2025). Unraveling the impact of financial literacy, financial technology adoption, and access to finance on small medium enterprises business performance and sustainability: A serial mediation model. Cogent Business & Management, 12(1), Article 2487837. https://doi.org/10.1080/23311975.2025.2487837

Kurniawan, Maulana, A., & Iskandar, Y. (2023). The effect of technology adaptation and government financial support on sustainable performance of MSMEs during the COVID-19 pandemic. Cogent Business & Management, 10(1), Article 2177400. https://doi.org/10.1080/23311975.2023.2177400

Mabula, J. B., & Dong, H. (2018). Financial literacy of SME managers' on access to finance and performance: The mediating role of financial service utilization. International Journal of Advanced Computer Science and Applications, 9(9). https://doi.org/10.14569/IJACSA.2018.090905

Masdupi, E., Firman, Rasyid, R., & Darni, M. O. (2024). Financial literacy and sustainability in SMEs: Do financial risk attitudes, access to finance, and organizational risk-taking tolerance mediate?. Asian Economic and Financial Review, 14(1), 43–58. https://doi.org/10.55493/5002.v14i1.4959

Mugisha, H., & Ahenkan, A. (2026). Green financing and sustainable growth of small and medium enterprises in Uganda and Ghana: The moderating role of organizational innovative capacity. Business Strategy & Development, 9(2), Article e70365. https://doi.org/10.1002/bsd2.70365

Ngoasong, M. Z., Wahga, A. I., Njinyah, S. Z., & Tseng, Y. (2026). The impact of sustainability orientation and sustainability challenges in SME responses to institutional support. Business Strategy and the Environment, Article bse.70644. https://doi.org/10.1002/bse.70644

Padi, A., Musah, A., Blay, M. W., & Okyere, D. O. (2026). Financial literacy, environmental awareness and green investment readiness in renewable energy adoption by SMEs in Ghana. Discover Sustainability, 7(1), Article 537. https://doi.org/10.1007/s43621-026-02947-x

Paterson, F., Baranova, P., & Gallotta, B. (2022). Towards a conceptual framework of enterprise support for pro-environmental small and medium-sized enterprises: A contextualised review of diverse knowledge domains. Local Economy: The Journal of the Local Economy Policy Unit, 37(3), 142–168. https://doi.org/10.1177/02690942221097373

Peris, S. F., Islam, R., Abir, T., Purnima, F. H., Gupta, P. D., Ali, K. S., & Daud, S. N. (2026). Advancing SDGs with green market orientation by exploring how environmental orientation, government support, and organizational support improve SME performance in Bangladesh. Discover Sustainability, 7(1), Article 793. https://doi.org/10.1007/s43621-026-03070-7

Pramana, M. S., Idawati, I. A. A., Maharani, I. A. D. P., & Putra, P. I. P. (2026). Financial literacy and business sustainability among MSMEs in Denpasar City: The mediating role of access to financial services. Journal of Entrepreneurial and Business Diversity, 4(4), 708–715. https://doi.org/10.38142/jebd.v4i4.435

Putri, A. N. A., Hermawan, P., Mirzanti, I. R., Meadows, M., & Sadraei, R. (2025). Unpacking green growth in SMEs: A framework for dynamic capabilities, value co-creation, and sustainable performance. Sustainable Futures, 10, Article 100840. https://doi.org/10.1016/j.sftr.2025.100840

Ramadani, A. G., Ferawati, & Marheni, D. K. (2025). Access to finance as a mediator of the relationship between financial literacy and financial technology on MSMEs sustainability. Managerial Journal, 12(3), 401–429. https://doi.org/10.30587/jurnalmanajerial.v12i03.9876

Schrank, J., & Kijkasiwat, P. (2024). Impacts of green innovation on small and medium enterprises' performance: The role of sustainability readiness and firm size. Business Strategy & Development, 7(3), Article e407. https://doi.org/10.1002/bsd2.407

Singh, V. K., Keshari, A., Singh, D., Singh, P. C., & Gautam, A. (2024). Green export strategies and SMEs export performance: Mediating roles of innovation, readiness, and activities. Journal of Innovation and Entrepreneurship, 13(1), Article 87. https://doi.org/10.1186/s13731-024-00451-y

Sinha, A., Mishra, S., Sharif, A., & Yarovaya, L. (2021). Does green financing help to improve environmental & social responsibility? Designing SDG framework through advanced quantile modeling. Journal of Environmental Management, 292, Article 112751. https://doi.org/10.1016/j.jenvman.2021.112751

Sintya, R., & Masdupi, E. (2025). The effect of entrepreneurial financing choice mediation: Financial literacy on sustainability of SMEs. Journal of Business and Management Applications, 11(2), 558. https://doi.org/10.17358/jabm.11.2.558

Ullah, R., Ahmad, H., Rehman, F. U., & Fawad, A. (2023). Green innovation and sustainable development goals in SMEs: The moderating role of government incentives. Journal of Economic and Administrative Sciences, 39(4), 830–846. https://doi.org/10.1108/JEAS-07-2021-0122

Wang, K.-H., Zhao, Y.-X., Jiang, C.-F., & Li, Z.-Z. (2022). Does green finance inspire sustainable development? Evidence from a global perspective. Economic Analysis and Policy, 75, 412–426. https://doi.org/10.1016/j.eap.2022.06.002

Widyastuti, M., Ferdinand, D. Y. Y., & Hermanto, Y. B. (2023). Strengthening formal credit access and performance through financial literacy and credit terms in micro, small and medium businesses. Journal of Risk and Financial Management, 16(1), Article 52. https://doi.org/10.3390/jrfm16010052

Woode, J. K. (2024). Green finance and green growth: A systematic literature review on awareness, existing channels, instruments, and techniques. Development and Sustainability in Economics and Finance, 1, Article 100004. https://doi.org/10.1016/j.dsef.2024.100004

Xiong, M., & Wang, L. (2026). Driving sustainable performance through green innovation and circular practices: The role of capabilities, finance, and institutions in the SMEs sector. Journal of Innovation & Knowledge, 18, Article 101098. https://doi.org/10.1016/j.jik.2026.101098

Zhang, S., Wu, Z., Wang, Y., & Hao, Y. (2021). Fostering green development with green finance: An empirical study on the environmental effects of green credit policy in China. Journal of Environmental Management, 296, Article 113159. https://doi.org/10.1016/j.jenvman.2021.113159