Determinants of financial inclusion among the SMEs during COVID-19 pandemic in Malaysia

Financial inclusion is a crucial and essential topic which had gained the interest of many independent researchers, academicians, policymakers and other party from all over the world. Every person has the right to be financially included in a country and this same goes to the Small and Medium Enterprises (SME) as part of the society. With the recent outbreak of Covid-19 pandemic which include Malaysia itself, it has been reported that the needs for financing had increased and the issues arise when some of the SME entrepreneurs failed to gain the access to the available financial assistances announced by the government as well as other financial institutions. This study then intended to examine the six determinants of financial inclusion among the SMEs during Covid-19 pandemic in Malaysia and the respondents are the SME owners located in four districts in Kedah. This study employed quantitative method where questionnaire is used as a method in collection the data. The determinants examined are formalities, administration of business records, bureaucracy of financial institutions, firm size and life expectancy, collateral requirement and awareness of funding sources that will affect the financial inclusion among the SMEs, which is the dependent variable. The sample study consists of 180 SME entrepreneurs and the data gathered was analyzed using the SPSS version 22 and Smart Partial Lease Square (PLS) method version 3. The finding of the study revealed that two determinants had positive relationship towards financial inclusion among the SMEs; administration of business records and collateral requirement and the most influential determinant for financial inclusion among the SMEs during the Covid-19 pandemic is collateral requirement. This study will helps the SMEs in improving their current business management and hence, increase their access to finance so that they can be financially included. Relevant financial institutions and also policymakers can revise their policies in supporting the financial inclusion of the SMEs. Further study can be improved by engaging with larger sample and examining other context of financial inclusion.