Green Economy as a Mediator Between Local Revenue, Investment, and Financial Sustainability in Rural SMEs

Abstract

This study investigates the mediating role of the green economy in the relationship between local revenue, local investment, and financial sustainability in rural SMEs. Employing a quantitative approach, data were collected from 100 SMEs in rural Indonesia using structured surveys and analyzed with SmartPLS. The findings reveal that local revenue significantly influences the green economy and financial sustainability, while local investment directly impacts financial sustainability but not the green economy. Additionally, the green economy acts as a significant mediator in the relationship between local revenue and financial sustainability but not between local investment and financial sustainability. These results underscore the pivotal role of the green economy in enhancing financial sustainability through effective utilization of local revenue. This study provides valuable insights for policymakers and practitioners, emphasizing the need to prioritize green economic practices to strengthen the financial sustainability of rural SMEs. Future research is recommended to explore broader variables and regions for a more comprehensive understanding of this dynamic relationship.