Determinants of green financing adoption among small and medium-sized enterprises (SMEs) in Malaysia

Lee, Min Ern and Lim, Hooi Xing and Lim, Jia Wei and Na, Siow Han and Yee, Puo Xin (2025) Determinants of green financing adoption among small and medium-sized enterprises (SMEs) in Malaysia. Final Year Project, UTAR.

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Abstract

Small and medium-sized enterprises (SMEs) play an important role in Malaysia's economic development, but their use of green financing remains restricted, despite rising awareness of climate change and sustainability. Previous research has mostly focused on the impediments to green finance adoption, but there is little understanding of the factors influencing SMEs' financing decisions. As a result, the purpose of this research is to look at the factors that influence Malaysian SMEs' adoption of green finance. The independent factors are government support, financing information, technology, environmental commitment, corporate governance, production, and company size. Primary data were gathered using an online questionnaire distributed to 413 SME financial decision-makers in Malaysia. The data were analysed using descriptive statistics, reliability and multicollinearity tests, and logistic regression with the Likelihood Ratio Test and Wald Test. The findings reveal that financing information, environmental commitment, and company size all have a substantial impact on SMEs' adoption of green financing, however government support, technology, corporate governance, and production do not. These findings emphasize the need of excellent financial communication and strong environmental values in guiding SMEs toward sustainable financing practices. This paper provides significant insights for policymakers, financial institutions, SMEs and academics by outlining measures for increasing green finance adoption and supporting Malaysia's transition to a low-carbon economy. Keywords: small and medium-sized enterprises (SMEs); green financing; sustainability; financing adoption; Malaysia Subject Area: HG1641 – 1643 Bank loans. Bank credit. Commercial loans

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