Impact of Digital Payment Systems on Credit Access for Business Clans in SME Sector in Sri Lanka

The main research question which the document intends to address is “Does the Usage of digital payment systems lead to better financial traceability; will it impact SME business clans credit access in Sri Lanka?” This study examines the transformative impact of Usage of Digital Payment Systems (UDPS) on Small and Medium Enterprises' (SMEs) credit access, mediated by the traceability of financial data (TFD) and Moderated by Government Intervention (GI) in the evolving financial landscape of Sri Lanka. Using Partial Least Squares Structural Equation Modeling (PLS-SEM) as an analytical framework, derived from a comprehensive literature review, the research rigorously tests hypotheses through meticulous examination of measurement and structural models, enhanced by SEM-PLS Bootstrapping for reliable estimation of standard errors and confidence intervals.
Findings reveal a significant positive correlation between UPDS and Credit Access to SMEs (CA2SME), establishing Usage of Digital Payment Systems as pivotal in shaping SME credit access in Sri Lanka. Through mediation analysis, the study elucidates the role of Traceability of Financial Data (TFD) in bridging the relationship between UPDS and CA2SME. Empirical evidence suggests UPDS influence on SME credit access is not solely direct but intricately mediated by perceived transactional benefits. The research introduces a mediating hypothesis, emphasizing the paramount role of TFD in shaping the connection between UPDS and Credit Access to SMEs. Evaluation of model criteria robustly supports the proposed mediation model. Additionally, a systematic moderating analysis examines Government Intervention (GI), highlighting it as a significant moderator partially explaining the relationship. Effect size analysis emphasizes the substantial yet relatively smaller effect size of Government Intervention on CA2SME. The study concludes by exploring the impact of Traceability of Financial Data on Credit Access to SMEs, with SmartPLS Bootstrapping output solidifying TFD's significant positive influence on SME credit access in Sri Lanka.