Environmental sustainability, small and medium enterprises, and finance in Africa: a triplicate relationship.

Publisher: Springer Country of Publication: Germany NLM ID: 9441769 Publication Model: Print-Electronic Cited Medium: Internet ISSN: 1614-7499 (Electronic) Linking ISSN: 09441344 NLM ISO Abbreviation: Environ Sci Pollut Res Int Subsets: MEDLINE

Publication: <2013->: Berlin : Springer
Original Publication: Landsberg, Germany : Ecomed

Commerce* ; Government*; Natural Resources ; Africa ; Private Sector

The age-long debate between SME-growth nexus has ignored environmental sustainability, as evident by many previous empirical studies. However, the pivotal role of SMEs and their undeniable dominance in the business landscape of Africa presents itself as a potential instrument for leading sustainability advocacy on the African continent. The study investigates whether credit flows from the private sector and government-owned enterprises to small and medium enterprises guarantee growth and environmental sustainability using data from World Bank Databases for 35 African countries from 2006 to 2019. Results from the econometric analysis show that domestic credit flowing from the private sector and government-owned enterprises to SMEs leads to significant growth with greater impact at lower quantiles in the case of Africa. On the issue of environmental sanctity, credit flowing from the private sector to SMEs counteract the adverse effect of SMEs activities on the environment, while credit flowing from government enterprises intensify the negative effect of SMEs activities on the environment in the case of Africa. Furthermore, renewable energy significantly reduces environmental decay more efficiently in upper quantiles while natural resource rents aggravate environmental decay only for African countries in the lower quantiles. Policy recommendations are proffered in the manuscript within the ambit of the study findings.
(© 2023. The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.)

Adebayo TS, Onifade ST, Alola AA, Muoneke OB (2022) (2022) Does it take international integration of natural resources to ascend the ladder of environmental quality in the newly industrialized countries? Resour Policy Resour Policy 76:102616. (PMID: 10.1016/j.resourpol.2022.102616)
Ajide FM, Ojeyinka TA (2022) Financial development and entrepreneurship: insights from Africa. J Financial Regulation and Compliance, (ahead-of-print).
Alola AA, Okere KI, Muoneke OB, Dike GC (2022) Do bureaucratic policy and socioeconomic factors moderate energy utilization effect of net zero target in the EU? J Environ Manage 317:115386. (PMID: 10.1016/j.jenvman.2022.115386)
Artin P (2022) (2022) Critical sustainability factors of regional SMEs: a case study of regional Australia. Curr Res Environ Sustain 4:100138. (PMID: 10.1016/j.crsust.2022.100138)
Battilana J, Lee M (2014) Advancing research on hybrid organizing—insights from the study of social enterprises. Acad Manag Ann 8(1):397–441. (PMID: 10.5465/19416520.2014.893615)
Beck T, Demirguc-Kunt A, Maksimovic V (2005) Financial and legal constraints to firm growth: how does size matter? J Finance 60(1):137–177. (PMID: 10.1111/j.1540-6261.2005.00727.x)
Charfeddine L, Mrabet Z (2017) The impact of economic development and social-political factors on ecological footprint: a panel data analysis for 15 MENA countries. Renew Sustain Energy Rev 76:138–154. (PMID: 10.1016/j.rser.2017.03.031)
Chege SM, Wang D (2020) (2020) The influence of technology innovation on SME performance through environmental sustainability practices in Kenya. Technol Soc 60:101210. https://doi.org/10.1016/j.techsoc.2019.101210. (PMID: 10.1016/j.techsoc.2019.101210)
Classen C, Roloff J (2012) The link between responsibility and legitimacy: the case of De Beers in Namibia. J Bus Ethics 107(3):379–398. (PMID: 10.1007/s10551-011-1045-0)
Crick F, Eskander S, Fankhauser S, Diop M (2018) How do African SMEs respond to climate risks? Evidence from Kenya and Senegal. World Dev 108(2018):157–168. https://doi.org/10.1016/j.worlddev.2018.03.015. (PMID: 10.1016/j.worlddev.2018.03.015)
Cucculelli M, Peruzzi V, Zazzaro A (2018) Relational capital in lending relationships: evidence from European family firms. Small Bus. Econ. https://doi.org/10.1007/s11187-018-0019-3 . in press.
Cui G, Norkute M, Sarafidis V, Yamagata T (2020) Two-stage instrumental variable estimation of linear panel data models with interactive effects. ISER Discussion Paper 110.
Dong Q, Wen S, Liu X (2020) Credit allocation, pollution and sustainable growth: theory and evidence from China. Emerg Mark Financ Trade 56(12):2793–2811. https://doi.org/10.1080/1540496X.2018.1528869. (PMID: 10.1080/1540496X.2018.1528869)
Dormann CF, Elith J, Bacher S, Buchmann C, Carl G, Carré G, ... Lautenbach S (2013) Collinearity: a review of methods to deal with it and a simulation study evaluating their performance. Ecography, 36(1), 27-46.
Driscoll JC, Kraay AC (1998) Consistent covariance matrix estimation with spatially dependent panel data. Rev Econ Stat 80(4):549–560. (PMID: 10.1162/003465398557825)
Ehrgott M, Reimann F, Kaufmann L, Carter C (2011) Social sustainability in selecting emerging economy suppliers. J Bus Ethics 98(1):99–119. (PMID: 10.1007/s10551-010-0537-7)
Esho E, Verhoef G (2018) The funding gap and the financing of small and medium businesses: an integrated literature review and an agenda. MPRA Paper No. 90153. Available at: https://mpra.ub.uni-muenchen.de/90153/.
Firth M, Lin C, Liu P, Wong ML (2009) Inside the black box: bank credit allocation in China’s private sector. J Bank Finance 33:1144–1155. https://doi.org/10.1016/j.jbankfin.2008.12.008. (PMID: 10.1016/j.jbankfin.2008.12.008)
Freeman RE (1984) Strategic management: a stakeholder theory. J Manag Stud 39(1):1–21.
Geddes A, Schimdt TS, Steffen B (2018) The multiple roles of state investment banks in low-carbon energy finance: an analysis of Australia, the UK, and Germany. Energy Policy 115(2018):158–170. (PMID: 10.1016/j.enpol.2018.01.009)
Gill AR, Viswanathan KK, Hassan S (2017) The Environmental Kuznets Curve (EKC) and the environmental problem of the day. Renew Sustain Energy Rev 81(2):1636–1642.
Grossman GM, Krueger AB (1991) Environmental impacts of a North-American free trade agreement. National Bureau of Economic Research working paper ser no. 3914:1–57. 10.3386/ w3914.
Gujba H, Thorne S, Mulugetta Y, Rai K, Sokona Y (2012) Financing low carbon energy access in Africa. Energy Policy 47(2012):71–78. (PMID: 10.1016/j.enpol.2012.03.071)
Halliru AM, Loganathan N, Hassan AAG, Mardani A, Kamyab H (2020) Re-examining the environmental Kuznets curve hypothesis in the economic community of West African States: a panel quantile regression approach. J Clean Prod 276:124247. (PMID: 10.1016/j.jclepro.2020.124247)
Hu Y, Jiang H, Zhong Z (2020) Impact of green credit on industrial structure in China: theoretical mechanism and empirical analysis. Environ Sci Pollut Res.  https://doi.org/10.1007/s11356-020-07717-4.
Iqbal BA, Rahman MN (2015) Contribution of ASEAN-6 SMEs to economic growth of ASEAN. Econ World 3(11–12):258–269. https://doi.org/10.1726/2328-7144/2015.1112.002. (PMID: 10.1726/2328-7144/2015.1112.002)
Jackowicz & Kozłowski (2019) Social ties between SME managers and bank employees: financial consequences vs. SME Managers’ Perceptions Emerging Markets Review 40(2019):100619. https://doi.org/10.1016/j.ememar.2019.05.004. (PMID: 10.1016/j.ememar.2019.05.004)
Javadi S, Al-masum A (2021) (2021) The impact of climate change on the cost of bank loans. J Corp Finan 69:102019. https://doi.org/10.1016/j.jcorpfin.2021.102019. (PMID: 10.1016/j.jcorpfin.2021.102019)
Kassi DF, Li Y, Riaz A, Wang X, Batala LK (2022) Conditional effect of governance quality on the finance-environment nexus in a multivariate EKC framework: evidence from the method of moments-quantile regression with fixed-effects models. Environ Sci Pollut Res, 1–25.
Kautonen T, Schillebeeckx SJD, Gartner J, Hakala H, Salmela-Aro K, Snellman K (2020) The dark side of sustainability orientation for SME performance. J Business Venturing Insights. 14(2020); e00198.  https://doi.org/10.1016/j.jbvi.2020.e00198.
King RG, Levine R (1993) Finance and growth: Schumpeter might be right. Quart J Econ 108(3):717–737. (PMID: 10.2307/2118406)
Kripfganz S, Sarafidis V (2021) XTIVDFREG: Stata module to perform defactored instrumental variables estimation of large panel data models.
Kuntchev V, Ramalho R, Rodríguez-Meza R, Yang JS (2012) What have we learned from the enterprise surveys regarding access to finance by SMEs? Version: February 14, 2012.
Kwakwa PA, Alhassan H, Adu G (2019) Effect of natural resources extraction on energy consumption and carbon dioxide emission in Ghana. Int J Energy Sect Manage 14(1):20–39. (PMID: 10.1108/IJESM-09-2018-0003)
Lasisi TT, Alola AA, Muoneke OB, Eluwole KK (2022) (2022) The moderating role of environmental-related innovation and technologies in growth-energy utilization nexus in highest-performing eco-innovation economies. Technol Forecast Soc Chang 183:121953. (PMID: 10.1016/j.techfore.2022.121953)
Le A, Doan A (2020) Corruption and financial fragility of small and medium enterprises: International evidence, J Multinatl Fin Manag.  https://doi.org/10.1016/j.mulfin.2020.100660.
Levine R (2005) Finance and growth: theory and evidence. In P. Aghion, & S. Durlauf (Eds.), Handbook of economic growth. Amsterdam: Elsevier Science.
Levine R, Loayza N, Beck T (2000) Financial intermediation and growth: causality analysis and causes. J Monet Econ 46(1):31–77. (PMID: 10.1016/S0304-3932(00)00017-9)
Li OZ, Su X, Yang Z (2012) State control, access to capital and firm performance. China J Account Res 5(2012):101–125. https://doi.org/10.1016/j.cjar.2012.05.001. (PMID: 10.1016/j.cjar.2012.05.001)
Machado JA, Silva JS (2019) Quantiles via moments. J Econometr 213(1):145–173. (PMID: 10.1016/j.jeconom.2019.04.009)
Marquaridt DW (1970) Generalized inverses, ridge regression, biased linear estimation, and nonlinear estimation. Technometrics 12(3):591–612. (PMID: 10.1080/00401706.1970.10488699)
Minh TN, Kim VPT, Ngoc AM (2020) Political connections, government support and SME tax payments: a note from fixed-effect quantile regression. Finance Res Lett.  https://doi.org/10.1016/j.frl.2020.101771.
Munoz P, Cacciotti G, Cohen B (2018) The double-edged sword of purpose-driven behavior in sustainable venturing. J Bus Ventur 33(2):149–178. (PMID: 10.1016/j.jbusvent.2017.12.005)
Muoneke OB, Okere KI, Nwaeze CN (2022) Agriculture, globalization, and ecological footprint: the role of agriculture beyond the tipping point in the Philippines. Environ Sci Pollut Res.  https://doi.org/10.1007/s11356-022-19720-y.
Myslimi and Kacani (2016) Impact of SMEs in economic growth in Albania. European Journal of Sustainable Development. Vol. 5(3); 151-158.
Nathaniel SP, Yalçiner K, Bekun FV (2021) Assessing the environmental sustainability corridor: linking natural resources, renewable energy, human capital, and ecological footprint in BRICS. Resour Policy 70:101924. (PMID: 10.1016/j.resourpol.2020.101924)
Norkutė M, Sarafidis V, Yamagata T, Cui G (2021) Instrumental variable estimation of dynamic linear panel data models with defactored regressors and a multifactor error structure. J Econometr 220(2):416–446. (PMID: 10.1016/j.jeconom.2020.04.008)
Nwani C (2022) Financing low-carbon growth in Africa. Policy path for strengthening the links between financial intermediation, resource allocation and environmental sustainability. Cleaner Environ Syst. Vol. 6; 100082.
Nykvist B, Maltais A (2022) Too risky – the role of finance as a driver of sustainability transitions. Environ Innov Soc Trans 42(2022):219–231. (PMID: 10.1016/j.eist.2022.01.001)
Okere KI, Onuoha FC, Muoneke OB, Nwaeze NC (2022) Sustainability challenges in Peru: embossing the role of economic integration and financial development- application of novel dynamic ARDL simulation. Environ Sci Pollut Res 29:36865–36886. (PMID: 10.1007/s11356-021-17756-0)
Onyeiwu C, Muoneke OB, Nkoyo U (2021a) Financing of small and medium scale enterprises and its growth impact in Nigeri T in Nigeria. J Entrepreneur Finance 22(2):30–49. (PMID: 10.57229/2373-1761.1385)
Onyeiwu C, Muoneke OB, Abayomi AM (2021b) Effects of microfinance bank credit on small and medium scale businesses: evidence from Alimosho LGA Lagos State. J Entrepreneur Finance 22(2):49–65. (PMID: 10.57229/2373-1761.1373)
Pagano M (1993) Financial markets and growth: an overview. Eur Econ Rev 37:613–622. https://doi.org/10.1016/0014-2921(93)90051-B. (PMID: 10.1016/0014-2921(93)90051-B)
Panayotou T (1997) Demystifying the environmental Kuznets curve: turning a black box into a policy tool. Environ Dev Econ 2(4):465–484. (PMID: 10.1017/S1355770X97000259)
Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels (IZA Discussion Paper No. 1240). Institute for the Study of Labor (IZA).
Pesaran MH (2007) A simple panel unit root test in the presence of cross-section dependence. J Appl Economet 22(2):265–312. (PMID: 10.1002/jae.951)
Qayes S (2015) Outreach and performance of microfinance institutions: a panel analysis. Appl Econ 47(18):1909–1925. (PMID: 10.1080/00036846.2014.1002891)
Quartey P, Turkson E, Abor JY, Iddrisu AM (2017) Financing the growth of SMEs in Africa: what are the constraints to SME financing within ECOWAS? Rev Dev Finance 7(2017):18–28. https://doi.org/10.1016/j.rdf.2017.03.001. (PMID: 10.1016/j.rdf.2017.03.001)
Schumpeter JA (1912) The theory of economic development. Cambridge, MA: Harvard University Press.
Sharif A, Bhattacharya M, Afshan S, Shahbaz M (2021) Disaggregated renewable energy sources in mitigating CO2 emissions: new evidence from the USA using quantile regressions. Environ Sci Pollut Res 28(41):57582–57601. (PMID: 10.1007/s11356-021-13829-2)
Shittu W, Adedoyin FF, Shah MI, Musibau HO (2021) An investigation of the nexus between natural resources, environmental performance, energy security and environmental degradation: evidence from Asia. Resour Policy 73:102227. (PMID: 10.1016/j.resourpol.2021.102227)
Solow RM (1956) A contribution to the theory of economic growth. Q J Econ 70(1):65–94. (PMID: 10.2307/1884513)
Tian P, Lin B (2019) Impact of financing constraints on firm’s environmental performance: evidence from China with survey data. J Clean Prod 217(2019):432–439. https://doi.org/10.1016/j.jclepro.2019.01.209. (PMID: 10.1016/j.jclepro.2019.01.209)
Ullah, B. (2019) Financial constraints, corruption, and SME growth in transition economies. The Quarterly Review of Economics and Finance.  https://doi.org/10.1016/j.qref.2019.05.009.
Ugwu JN, Nwani C, Okere KI, Agbanike TF (2022) Regulatory impediments to carbon emission mitigation in Sub-Saharan Africa: the impact of a hostile business environment and high tax burden. Environmental Science and Pollution Research. 1–13.
Wang (2016) What are the biggest obstacles to growth of SMEs in developing countries? An empirical evidence from an enterprise survey. Borsa Istanbul Rev 16(3):167–176. (PMID: 10.1016/j.bir.2016.06.001)
Wang T, Bansal P (2012) Social responsibility in new ventures: profiting from a long-term orientation. Strat Manag J 33(10):1135–1153. (PMID: 10.1002/smj.1962)
Wen H, Lee C, Zhou F (2021) Green credit policy, credit allocation efficiency and upgrade of energy-intensive enterprises. Energy Economics 94:105099. (PMID: 10.1016/j.eneco.2021.105099)
Westerlund J (2005) New simple tests for panel cointegration. Economet Rev 24(3):297–316. (PMID: 10.1080/07474930500243019)
Westerlund J (2007) Testing for error correction in panel data. Oxford Bull Econ Stat 69(6):709–748. (PMID: 10.1111/j.1468-0084.2007.00477.x)
Yang Q, He J, Liu T, Zhu Z (2021) Environmental effects of credit allocation structure and environmental expenditures: evidence from China. Sustainability 13:5865. https://doi.org/10.3390/su13115865. (PMID: 10.3390/su13115865)
Young DR (2012) The state of theory and research on social enterprises. In: Gidron, B., Hasenfeld, Y. (Eds.), Social enterprises: an organizational perspective. Palgrave Macmillan, London, pp. 19–46.

Keywords: Africa; Credit flows; Environmental sustainability; MMQR; SMEs

Date Created: 20230110 Date Completed: 20230405 Latest Revision: 20230405

20231215

10.1007/s11356-022-25012-2

36627430