THE ROLE OF FINANCIAL DECISION-MAKING EFFICIENCY IN SME GROWTH AND BUSINESS SUSTAINABILITY IN PAKISTAN

Abstract

This study investigates the role of financial decision-making efficiency in SME growth and business sustainability in Pakistan. Although small and medium enterprises (SMEs) contribute to economic development, their performance and long-term viability may depend partly on the effectiveness of their financial management practices. Using a quantitative, cross-sectional survey design, primary data were collected from 320 SME owners and managers operating in the manufacturing, services, and trading sectors in Lahore, Karachi, and Islamabad. Data were analyzed using SPSS and SmartPLS through descriptive statistics, reliability analysis, correlation analysis, and partial least squares structural equation modeling (PLS-SEM). Financial decision-making efficiency was conceptualized through three dimensions: budgeting efficiency, investment appraisal, and working capital management. The findings indicate that financial decision-making efficiency is positively and significantly associated with SME growth ((\beta = 0.487, p < 0.001)) and business sustainability ((\beta = 0.523, p < 0.001)). Financial literacy also positively moderates both relationships, suggesting that financial knowledge strengthens the association between efficient financial decision-making and business outcomes. The study highlights the importance of effective financial management practices and financial literacy for SME development and provides relevant insights for SME managers and policymakers seeking to strengthen financial capabilities and support sustainable business performance in Pakistan.