<![CDATA[This study aims to examine the relationship between government policy and MSME welfare by incorporating business development as a mediating variable. Although various interventions have been implemented, their effectiveness in enhancing welfare through strengthening business capacity remains unclear. This research employs a quantitative approach using primary data collected from MSME actors in Bondowoso Regency, Indonesia, who received government assistance during 2022–2024. Data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) to test direct and indirect relationships among variables. The results indicate that government policy has a direct effect on MSME welfare, and business development also plays an important role in improving welfare. However, government policy does not significantly influence business development, resulting in no significant mediating effect. These findings suggest that policy interventions tend to provide direct benefits rather than strengthening long-term business capacity.]]>
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