How Bank Finance and Government Support Affect Business Performance? Examining Mediation

Abstract

Background: One sector with a high potential to be the focus of MSME development is the food and beverage sector. MSMEs are required to survive and continually increase their competitiveness by responding to changes in the external environment, both periodically and continuously, and by leveraging their internal capabilities.
Purpose: This study attempts to contribute to a better understanding of bank finance and government support in terms of entrepreneurial competence, financial behavior, and organizational performance. Specifically, this study investigates MSMEs' entrepreneurial competence and financial behavior and determines whether these competencies and behaviors can improve their business performance.
Design/methodology/approach: This study employs the SEM-PLS technique with cross-sectional data collected from April to May 2025 from 190 MSMEs in the halal food sector in Malang Raya, Indonesia. This study uses resource-based theory, which provides a theoretical lens for testing the influence of bank finance, government support, entrepreneurial competence, financial behavior, and halal food business performance.
Findings/Results: The study indicates that bank finance and government support improve business performance. Indirectly, competence can mediate the influence of bank finance and government support on business performance. However, this study's results provide evidence that financial behavior does not mediate the effects of bank finance and government support on business performance.
Conclusion: The study results indicate that MSME-owned financial institutions can improve their business performance. Government support and entrepreneurial competence also participate in this. However, excessive self-confidence and financial behavior do not mediate the influence of bank finance on the performance of halal MSMEs. The more competent MSME actors are, the more they can convince stakeholders about their ideas and products.
Originality/value (State of the art): This study contributes to understanding the factors that influence MSME halal performance, especially from the perspective of bank finance, government support, and entrepreneurial competence. The original value of this study lies in its integrated approach, which tests the mediating roles of self-confidence and financial behavior in the relationship between bank finance and halal MSME business performance. This aspect has rarely been raised in previous literature.

Keywords:    bank finance, government support, entrepreneur competency, behavioral finance, business performance