Financial Literacy for Better Access to Finance, Financial Risk Attitude, and Sustainability of MSMEs in Indonesia

Abstract

<em>MSMEs are one of the sectors affected by the Covid-19 Pandemic in Indonesia, where most of them have experienced a decline in income and many have experienced capital difficulties. Based on data, only a few MSMEs in Indonesia receive financing from financial institutions. While based on previous research, financial literacy is an important factor for MSMEs to get access to finance and can improve their business sustainability. This study aims to analyze the direct effect of Financial Literacy on the sustainability of MSMEs, and indirect effect if mediated by Access to Finance and the Financial Risk Attitude for MSMEs in Indonesia. This study used the Path Analysis model, with primary data from online questionnaires obtained by the snowball sampling method on MSME managers/owners, and for data processing with SmartPLS software. The results showed that Financial Literacy affects MSME’s Sustainability, Access to Finance, and Financial Risk Attitude. In this study, Financial Literacy has the greatest influence on Access to Finance. However, Access to Finance and Financial Risk Attitude has no effect on Sustainability and has not succeeded in moderating the relationship between Financial Literacy and the Sustainability of MSMEs. It can be seen that MSMEs in Indonesia may still not have a long-term business development plan </em><em>and are accustomed to managing business finances in a conventional way, where it has not been able to take advantage of external sources of financing and still minimizes</em>

Effect of Financial Literacy, Capital Capacity, and Network on the Performance of MSMEs in South Tangerang, Banten, Indonesia

“…It is often known that financial literacy plays a critical role in determining the viability and profitability of Micro, Small, and Medium-Sized Enterprises (MSMEs). It includes all of the information, abilities, and mindset needed to successfully manage resources, make wise financial decisions, and handle the intricate workings of a corporation (Ferli, 2023;Rasjid, 2022). Research has consistently shown that financial literacy and a range of MSMEs' performance metrics are positively correlated (Lestari et al, 2022;Maswin & Sudrajad, 2023).…”

“…Financial Literacy: Measured using a composite index based on respondents' knowledge, skills, and behaviors related to financial management, investment, and risk assessment (Ferli, 2023;Lestari et al, 2022;Majid & Nugraha, 2022). Capital Capacity: Assessed based on access to financial resources, credit availability, investment opportunities, and funding sources (Altaf & Shah, 2021;Desai et al, 2021).…”

The Influence of the Use Financial Technology, Owner Financial Literacy, and Risk Tolerance on the Performance of MSMEs in Indonesia

“…Furthermore, owner financial literacy can also influence access to financing for MSMEs (Ferli, 2023). Financially literate owners are more likely to understand the requirements of lenders and investors, enabling them to present their businesses in a more favorable light when seeking external funding (Andrade et al, 2023;Mutasowifin & Sutisna, 2023).…”

International Collaboration Community Service Indonesia Banking School – Khon Kaen Business School: SIMPPRO (Sistem Manajemen Peningkatan Produktivitas) to Improve Productivity Level of SMEs in Indramayu, West Java, Indonesia

“…The mentality and motivation of business actors will certainly have an impact on business progress (Ferli et al, 2023). However, there are indications that business actors in Indonesia do not have long-term growth goals (Ferli, 2023). Based on these problems, it is necessary for the government's role in efforts to increase Indonesia's productivity and competitiveness through a Productivity Improvement Management System (SIMPPRO).…”