Ramadan demand exposure and the path to SME sustainability: the roles of financial performance and financial sustainability

This study examines the relationship between Financial Performance and SME Sustainability by analyzing the mediating role of Financial Sustainability and the moderating role of Ramadan Demand Exposure among Indonesian SMEs. The study employs a quantitative explanatory approach using data from 1,797 Indonesian SMEs selected through purposive sampling. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4, including mediation, moderated mediation, Measurement Invariance of Composite Models (MICOM) and Multi-Group Analysis (MGA) based on region and business type. The findings show that Financial Performance contributes positively to SME Sustainability and that Financial Sustainability mediates this relationship. Ramadan Demand Exposure does not strengthen the direct relationship between Financial Performance and SME Sustainability but strengthens the indirect relationship through Financial Sustainability. MGA shows that the structural relationships do not differ significantly between rural and urban SMEs or between culinary and non-culinary SMEs. These findings indicate that Ramadan Demand Exposure contributes to SME sustainability primarily by converting financial performance into sustainable financial capacity, allowing available resources to form financial slack that buffers business pressures and uncertainty. The study contributes to the SME sustainability literature by positioning Financial Sustainability as an important financial mechanism and Ramadan Demand Exposure as a contextual condition from the perspective of Organizational Slack Theory.