FINTECH-ENABLED FINANCIAL INCLUSION AND SME GROWTH: EVALUATING THE ROLE OF DIGITAL CREDIT ECOSYSTEMS AND BEHAVIORAL TRUST IN PAKISTAN’S EMERGING ECONOMY

Abstract

Financial technology (FinTech) has transformed financial service delivery by expanding access to digital financial products and reducing financing constraints for small and medium-sized enterprises (SMEs). Despite substantial growth in Pakistan's digital financial ecosystem, many SMEs continue to face limited access to formal credit, hindering their growth and competitiveness. This study examined the effect of FinTech-enabled financial inclusion on SME growth by investigating the mediating role of digital credit ecosystems and the moderating role of behavioral trust within Pakistan's emerging economy. A quantitative, explanatory, and cross-sectional research design was employed. Primary data were collected through a structured questionnaire administered to 387 SME owners and senior managers selected using stratified random sampling from various economic sectors across Pakistan. The proposed research model was analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings indicated that FinTech-enabled financial inclusion significantly enhanced SME growth and positively influenced the development of digital credit ecosystems. Digital credit ecosystems were found to partially mediate the relationship between FinTech-enabled financial inclusion and SME growth, demonstrating that efficient digital lending mechanisms are essential for translating financial inclusion into improved business performance. Furthermore, behavioral trust significantly strengthened the relationship between digital credit ecosystems and SME growth, highlighting the importance of trust in encouraging SMEs' adoption and sustained use of digital financial services. The study contributes to the literature by integrating the Unified Theory of Acceptance and Use of Technology (UTAUT) with digital financial inclusion and SME development, providing a comprehensive framework for understanding technology-enabled enterprise growth in emerging economies. The findings offer practical implications for policymakers, financial institutions, FinTech firms, and SME managers by emphasizing the need to strengthen digital financial infrastructure, enhance cybersecurity, improve digital financial literacy, and develop inclusive digital credit ecosystems to support sustainable economic development in Pakistan.