SME Loans and Economic Growth Nexus in Kazakhstan: Evidence from ARDL, FMOLS, and Bai–Perron Structural Break Analysis

This study investigates the relationship between SME loans and economic growth in Kazakhstan using quarterly data covering the period 2010Q1–2025Q3. While the finance–growth nexus has been extensively studied, empirical evidence focusing specifically on SME credit remains limited, particularly for transition economies. To address this gap, the study employs the ARDL bounds testing approach to examine both short- and long-run dynamics, while FMOLS is used as a robustness check. Structural breaks are incorporated into the model based on Bai–Perron multiple breakpoint tests. The empirical findings reveal a positive and statistically significant long-run relationship between SME loans and economic growth. In contrast, short-run results indicate that the effect of SME loans is not statistically significant, suggesting that the growth impact of SME financing materializes over time rather than immediately. Among control variables, exports are found to have a strong and consistent positive effect on growth, reflecting the export-oriented structure of the Kazakh economy. Conversely, foreign direct investment exhibits a negative and relatively weak relationship with growth. Overall, the results highlight the importance of SME financing in supporting long-term economic growth while emphasizing the role of structural and external factors in shaping growth dynamics. This study contributes to the literature by providing country-specific evidence and offers policy-relevant insights for strengthening SME financing mechanisms.