Microfinance programme, entrepreneurial qualities and small business performance: empirical evidence in Kelantan and Terengganu.

Small and Medium Enterprises (SMEs) play a crucial role in economic development of developed and developing countries. However, until recently, financial constraint is still the most critical problem faced by the sector. As an alternative to the open market financing, small entrepreneurs are offered by microfinance schemes. This study highlighted the relationship between microfinance programme and small business performance and the mediating role of entrepreneurial qualities in the association between microfinance programme and small business performance due to the lack of study regarding this topic. This study employed a data set drawn from 238 microfinance participants particularly from Kelantan and Terengganu. Structural Equation Modeling technique with mediating effect of entrepreneurial qualities was used for analysing the relationship between the microfinance programme and small business performance. The findings indicated that microfinance programme is positively significant to the small business performance and at the same time contributed to the positive improvement of entrepreneurial qualities. However, the effect of microfinance programme on small business performance was partially mediated by entrepreneurial qualities. The small sample size which was dominated by small business was the major limitation of this study. The sample size and distribution also inhibited the comparison of the results between industry sectors. This result can be used in the study on microfinance programme, entrepreneurial qualities and small business performance in the future.