Green Finance Accessibility and Sustainable Economic Development: The Roles of Financial Literacy, Green Investment Capability, and Institutional Support

Access to green financing remains a challenge for micro, small, and medium enterprises (MSMEs), particularly in developing environmentally friendly investments and supporting sustainable economic development. This study aims to analyze the influence of financial literacy and institutional support on green financing accessibility, green investment capability, and sustainable economic development, including the mediating role of these two variables. The study used a quantitative approach with an explanatory cross-sectional survey design. Data were collected through purposive sampling from 300 MSME owners or managers and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4. All eight tested direct paths were positive and statistically significant. Financial literacy and institutional support were positively associated with green financing accessibility and green investment capability, while institutional support, green financing accessibility, and green investment capability were positively associated with sustainable economic development at the MSME level. Financial literacy and institutional support increase green financing accessibility and green investment capability, while institutional support, green financing accessibility, and green investment capability contribute positively to sustainable economic development. The mediation analysis also shows that green financing accessibility and green investment capability act as significant indirect pathways. This study broadens understanding of the interrelationships between financial literacy, institutional support, green financing, and green investment in supporting the economic sustainability of MSMEs. Practically, these findings emphasize the importance of improving financial literacy, facilitating access to green financing, and strengthening environmentally friendly investment capabilities