Improving Small and Medium Enterprises Financing for Stronger Financial and Non-Financial Performance

SMEs play a vital role in the economy of Malaysia. Microfinance provides small loans to the SMEs to enhance their businesses. With the SMEs representing 97.3% (645,136 establishments) of the total business establishments in Malaysia, it is crucial to have a continual investigation on the effects of microfinance have on these enterprises performance. This can expose viable areas of improvement needed for micro-financing activities. This research is aimed to investigate the relationship of microfinance with SMEs performance. The respondents are the SMEs from a district located in the state of Johor, Malaysia. Data were collected using the structured convenient sampling and analyzed with SPSS software. It was found that there is a strong positive relationship between microfinance with both the financial and non-financial SMEs performance (p < 0.001). The higher loan amount is significantly related to SMEs performance. It implies that regulators and policymakers should increase the loan amount limit of microfinance to finance the SMEs and in response, these microfinance institutions should increase their loan amount to further enhance SMEs performance.