Evaluation of the effect of financial literacy (financial awareness, financial capability and financial behavior) on investment decisions in micro, small and medium enterprises (MSMEs) in indonesia
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Published:
Feb 28, 2024
Keywords:
Financial Literacy , Investment Decisions, MSMEs, Indonesia
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Economy
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Abstract
Especially when it comes to Micro, Small, and Medium-Sized Enterprises (MSMEs) in Indonesia, financial literacy is crucial in guiding investment decisions. In this quantitative study, the relationship between MSME owners' and managers' investment decisions and the elements of financial literacy—financial knowledge, financial competence, and financial behavior—is examined. Data from the survey were analysed using Structural Equation Modelling with Partial Least Squares (SEM-PLS), and 164 respondents made up the sample. The results demonstrate that investing decisions are influenced by a combination of financial behaviour, financial competence, and financial awareness. Specifically, more informed, strategic, and cautious investing choices are linked to better financial literacy levels. The findings of this study demonstrate how crucial it is to raise financial literacy among Indonesia's MSMEs in order to foster competitiveness and economic growth. For practitioners, policymakers, and business owners who wish to equip MSMEs with the financial literacy and decision-making abilities necessary for wise investment choices, this study offers insightful information
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Sumantri, D. ., Fahmi , R. and Sari, M. . (2024) “Evaluation of the effect of financial literacy (financial awareness, financial capability and financial behavior) on investment decisions in micro, small and medium enterprises (MSMEs) in indonesia ”, Jurnal Mantik, 7(4), pp. 3203-3216. doi: 10.35335/mantik.v7i4.4519.
References
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Ardhiani, M. C., & Panjaitan, Y. (n.d.). Analysis of Financial Knowledge, Financial Awareness, and Financial Attitude on Investment Decisions in the Capital Market by Indonesian Millennial Generation.
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Bancoro, J. C. (2023). Financial Literacy of MSME Business Owners in the Municipality of San Jose, Negros Oriental, Philippines: A Basis for a State University’s Extension Program. International Journal of Asian Business and Management, 2(3), 241–274.
Charlyvia, I., & Riva’i, A. R. (2023). Pengaruh Literasi Keuangan, Personality Traits, dan Pengendalian Diri terhadap Perilaku Pengelolaan Keuangan (Studi pada Penggemar Artis Thailand). J-MAS (Jurnal Manajemen Dan Sains), 8(1), 189–195.
Chen, Y.-C., & Sun, S. (2023). Gender Differences in the Relationship Between Financial Capability and Health in Later Life: Evidence From Hong Kong. Innovation in Aging, 7(6), igad072.
Dela Cruz, N. A., Villanueva, A. C. B., Tolin, L. A., Disse, S., Lensink, R., & White, H. (2023). PROTOCOL: Effects of interventions to improve access to financial services for micro?, small?and medium?sized enterprises in low?and middle?income countries: An evidence and gap map. Campbell Systematic Reviews, 19(3), e1341.
Dsouza, S., & Prakash, M. A. (2023). THE SIGNIFICANCE OF FINANCIAL LITERACY FOR CONSUMER PROTECTION: A STUDY OF BANK CUSTOMERS IN DAKSHINA KANNADA DISTRICT. EPRA International Journal of Economic and Business Review (JEBR), 11(7), 32–39.
Eko, B. (2022). The Role of Financial Behavior as a Mediator of the Influence of Financial Literacy and Financial Attitudes on MSMEs Investment Decisions in Indonesia. Journal of Social Economics Research, 9(4), 193–203.
Falah, F. F., & Haryono, N. A. (2023). The Influence of Herding, Anchoring, Disposition, Personal Income, and Financial Literacy on Generation Z’s Investment Decision Making in Surabaya City. Technium Soc. Sci. J., 45, 210.
Fan, L. (2022). Mobile investment technology adoption among investors. International Journal of Bank Marketing, 40(1), 50–67.
Ferli, O. (2023). Financial Literacy for Better Access to Finance, Financial Risk Attitude, and Sustainability of MSMEs in Indonesia. Jurnal Manajemen (Edisi Elektronik), 111–122.
Grohmann, A., Klühs, T., & Menkhoff, L. (2018). Does financial literacy improve financial inclusion? Cross country evidence. World Development, 111, 84–96.
Gurung, M., & Gautam, K. P. (2023). Financial Well-being and Financial Literacy in Bhutan: Evidence from Bongo Gewog. Universal Journal of Financial Economics, 2(1), 1–18.
Hamdana, H., Pratikto, H., & Sopiah, S. (2021). A Conceptual Framework Of Entrepreneurial Orientation, Financial Literacy, And MSMEs Performance: The Role Of Access To Finance. Devotion Journal of Community Service, 3(2), 67–82. https://doi.org/https://doi.org/10.36418/dev.v3i2.96
Hanasri, A., Rinofah, R., & Sari, P. P. (2023). Pengaruh Literasi Keuangan, Pengetahuan Keuangan, dan Sikap Keuangan Terhadap Kinerja Keuangan pada Pelaku UMKM Bisnis online di Bantul. Ekonomis: Journal of Economics and Business, 7(1), 443–450.
Hartanti, M. F. P., Mardita, C. N., Tirta, M., Putra, A. R. A., & Setyaningrum, I. (2023). Literasi Pemasaran Digital dan Teknologi Keuangan Sebagai Sarana Peningkatan Omset UMKM di Probolinggo. J-MAS (Jurnal Manajemen Dan Sains), 8(1), 113–118.
Hartono, H. R. P., & Kurniawan, Y. D. (2023). Financial Literacy. A Case Study in Madiun. Indonesian Journal of Business Analytics, 3(3), 665–672.
Hermawan, A., Gunardi, A., & Sari, L. M. (2022). Intention to Use Digital Finance MSMEs: The Impact of Financial Literacy and Financial Inclusion. Jurnal Ilmiah Akuntansi Dan Bisnis, 17 (1), 171–182.
Iqbal, M. A., Saeed, A., & Rehman, S. U. (2023). IMPACT OF FINANCIAL LITERACY ON FINANCIAL SATISFACTION: MEDIATING ROLES OF INVESTMENT DECISIONS & MODERATING ROLE OF RISK ATTITUDE. Journal of Social Research Development, 4(2), 274–283.
Khan, K. A., Çera, G., & Pinto Alves, S. R. (2022). Financial capability as a function of financial literacy, financial advice, and financial satisfaction. E & M Ekonomie a Management.
Lestari, E. D., Hamid, N. A., Rizkalla, N., Purnamaningsih, P., & Urus, S. B. T. (2022). The Effect of Financial Literacy, Cost of Technology Adoption, Technology Perceived Usefulness, and Government Support on MSMEs’ Business Resilience. Global Journal of Business Social Sciences Review (GATR-GJBSSR), 10(3).
Maurya, R., Mohta, A., & Shunmugasundaram, V. (2023). IMPACT OF FINANCIAL LITERACY ON INVESTORS: A SYSTEMATIC LITERATURE REVIEW USING PRISMA PROTOCOL. International Journal of Accounting & Finance Review, 14(1), 53–66.
Mirosea, N., & Hajar, I. (2023). Effect of Financial Literacy and Behaviour on Investment Decisions (Study on Southeast Sulawesi investors). KnE Social Sciences, 230–238.
Munthe, H., Butar, R. S. B., Purba, D. P., & Panggabean, M. S. (2023). Investment Planning Financial Literacy Education in Class I Community Institutions In Medan. GANDRUNG: Jurnal Pengabdian Kepada Masyarakat, 4(2), 1115–1121.
Murhadi, W. R., Kencanasari, F. R., & Sutejo, B. S. (2023). The Influence of Financial Literacy and Financial Interest on The Financial risk Tolerance of Investor in Indonesia. Journal of Law and Sustainable Development, 11(2), 1–16.
Oppong, C., Salifu Atchulo, A., Akwaa-Sekyi, E. K., Grant, D. D., & Kpegba, S. A. (2023). Financial literacy, investment and personal financial management nexus: Empirical evidence on private sector employees. Cogent Business & Management, 10(2), 2229106.
Pedraza, J. M. (2021). The micro, small, and medium-sized enterprises and its role in the economic development of a country. Business and Management Research, 10(1), 33.
Prasetya, A., Rahardjo, K., Mawardi, M. K., Hidayat, R. R., & Prakasa, Y. (2021). The mediation role of financial literation in ensuring MSMEs sustainability: An organizational characteristics perspective. JEMA: Jurnal Ilmiah Bidang Akuntansi Dan Manajemen, 18(1), 61–79.
Putri, A. J., & Bangun, M. Y. R. (2019). Identifying Environmental, Social, and Governance (ESG) Implementation towards Growth and Sustainability: A Case Study at Assisted Micro, Small, and Medium Enterprise (MSME) by Bank Indonesia.
Rohmanto, F., & Susanti, A. (2021). Pengaruh literasi keuangan, lifestyle hedonis, dan sikap keuangan pribadi terhadap perilaku keuangan mahasiswa. Ecobisma (Jurnal Ekonomi, Bisnis Dan Manajemen), 8(1), 40–48.
Romadhani, N. A., & Handini, S. (2023). The Influence of Financial Literacy and Financial Behavior on Student Investment Decisions In Surabaya In Investment Company Digital-Based. Economos: Jurnal Ekonomi Dan Bisnis, 6(1), 37–47.
Romero Álvarez, Y., & Ramírez Montoya, J. (2018). Relación de la toma de decisiones financieras con el nivel de conocimiento financiero en las mipymes. Suma de Negocios, 9(19), 36–44.
Rumini, D. A. (2020). Peran Literasi Keuangan Sebagai Prediktor Kinerja Dan Keberlanjutan Umkm Di Kabupaten Badung. INVENTORY: Jurnal Akuntansi, 4(1), 53–62.
Rustan, D. M. (2021). Financial Literacy, Financial Behavior and Financial Attitudes Towards Investment Decisions and Firm Bankruptcy. ATESTASI: Jurnal Ilmiah Akuntansi, 4(1), 79–87.
Sangeetha, R., Mathew, J., & Francline, S. C. (2017). Status of Financial Literacy Centers in Karnataka. Ushus Journal of Business Management, 16(4), 23–35.
Sufyati, H. S., Handayani, T., Marzuki, F., & Zaelani, A. H. (2022). Socialization of Islamic Financial Institution Literacy in MSMEs Upscale in DKI Jakarta. Mattawang: Jurnal Pengabdian Masyarakat, 3(4), 409–414.
Suseno, I., Yohanna, L., & Sondari, E. (2022). Islamic financial literacy and management for MSMEs. Proceeding of the International Conference on Family Business and Entrepreneurship, 2(1).
Tahir, M. S., & Richards, D. W. (2023). Consumer financial behavior and financial capability. A Research Agenda for Consumer Financial Behavior: 0, 245.
Tamara, D., Suhardiman, S., Rustam, S. S., & Kurniawan, B. (n.d.). Indonesian Millennial Generations’ Financial Literacy in Relation to its Behavior in Investment Decision.
Tambunan, T., Santoso, W., Busneti, I., & Batunanggar, S. (2021). The development of MSMEs and the growth of peer-to-peer (P2P) lending in Indonesia. International Journal of Innovation, Creativity and Change. Www. Ijicc. Net.
van Wyk, D., & Bishop, A. (2023). Exploratory study: Financial behaviour of qualified financial professionals during South Africa’s lockdown. Journal of Economic and Financial Sciences, 16(1), 10.
Xiao, J. J., Huang, J., Goyal, K., & Kumar, S. (2022). Financial capability: a systematic conceptual review, extension and synthesis. International Journal of Bank Marketing, 40(7), 1680–1717.
Yazfinedi, Y. (2018). Usaha Mikro, Kecil, dan Menengah Di Indonesia: Permasalahan dan Solusinya. Quantum: Jurnal Ilmiah Kesejahteraan Sosial, 14(1), 33–41.
Yuwono, W., Ramadhani, D. S., Sasmita, E. W., & Sihotang, W. H. (2023). Analysis of the Influence of the Role of Financial Literacy on Personal Financial Management. European Journal of Business and Management Research, 8(3), 57–61.
Alibhai, S., Bell, S., & Conner, G. (2017). What’s happening in the missing middle?: lessons from financing SMEs.
Alshebami, A. S., & Aldhyani, T. H. H. (2022). The interplay of social influence, financial literacy, and saving behaviour among Saudi youth and the moderating effect of self-control. Sustainability, 14(14), 8780.
Ardhiani, M. C., & Panjaitan, Y. (n.d.). Analysis of Financial Knowledge, Financial Awareness, and Financial Attitude on Investment Decisions in the Capital Market by Indonesian Millennial Generation.
Bachtiar, Y., Koroy, T. R., Akbar, M., Nastiti, R., Normalina, N., Syahdan, S. A., Norbaiti, N., Munawaroh, R. R. S., & Firdaus, I. (2022). Edukasi Financial Capability: Mempersiapkan Generasi Muda Mencapai Financial Well-Being. Abdimas Universal, 4(2), 186–190.
Bancoro, J. C. (2023). Financial Literacy of MSME Business Owners in the Municipality of San Jose, Negros Oriental, Philippines: A Basis for a State University’s Extension Program. International Journal of Asian Business and Management, 2(3), 241–274.
Charlyvia, I., & Riva’i, A. R. (2023). Pengaruh Literasi Keuangan, Personality Traits, dan Pengendalian Diri terhadap Perilaku Pengelolaan Keuangan (Studi pada Penggemar Artis Thailand). J-MAS (Jurnal Manajemen Dan Sains), 8(1), 189–195.
Chen, Y.-C., & Sun, S. (2023). Gender Differences in the Relationship Between Financial Capability and Health in Later Life: Evidence From Hong Kong. Innovation in Aging, 7(6), igad072.
Dela Cruz, N. A., Villanueva, A. C. B., Tolin, L. A., Disse, S., Lensink, R., & White, H. (2023). PROTOCOL: Effects of interventions to improve access to financial services for micro?, small?and medium?sized enterprises in low?and middle?income countries: An evidence and gap map. Campbell Systematic Reviews, 19(3), e1341.
Dsouza, S., & Prakash, M. A. (2023). THE SIGNIFICANCE OF FINANCIAL LITERACY FOR CONSUMER PROTECTION: A STUDY OF BANK CUSTOMERS IN DAKSHINA KANNADA DISTRICT. EPRA International Journal of Economic and Business Review (JEBR), 11(7), 32–39.
Eko, B. (2022). The Role of Financial Behavior as a Mediator of the Influence of Financial Literacy and Financial Attitudes on MSMEs Investment Decisions in Indonesia. Journal of Social Economics Research, 9(4), 193–203.
Falah, F. F., & Haryono, N. A. (2023). The Influence of Herding, Anchoring, Disposition, Personal Income, and Financial Literacy on Generation Z’s Investment Decision Making in Surabaya City. Technium Soc. Sci. J., 45, 210.
Fan, L. (2022). Mobile investment technology adoption among investors. International Journal of Bank Marketing, 40(1), 50–67.
Ferli, O. (2023). Financial Literacy for Better Access to Finance, Financial Risk Attitude, and Sustainability of MSMEs in Indonesia. Jurnal Manajemen (Edisi Elektronik), 111–122.
Grohmann, A., Klühs, T., & Menkhoff, L. (2018). Does financial literacy improve financial inclusion? Cross country evidence. World Development, 111, 84–96.
Gurung, M., & Gautam, K. P. (2023). Financial Well-being and Financial Literacy in Bhutan: Evidence from Bongo Gewog. Universal Journal of Financial Economics, 2(1), 1–18.
Hamdana, H., Pratikto, H., & Sopiah, S. (2021). A Conceptual Framework Of Entrepreneurial Orientation, Financial Literacy, And MSMEs Performance: The Role Of Access To Finance. Devotion Journal of Community Service, 3(2), 67–82. https://doi.org/https://doi.org/10.36418/dev.v3i2.96
Hanasri, A., Rinofah, R., & Sari, P. P. (2023). Pengaruh Literasi Keuangan, Pengetahuan Keuangan, dan Sikap Keuangan Terhadap Kinerja Keuangan pada Pelaku UMKM Bisnis online di Bantul. Ekonomis: Journal of Economics and Business, 7(1), 443–450.
Hartanti, M. F. P., Mardita, C. N., Tirta, M., Putra, A. R. A., & Setyaningrum, I. (2023). Literasi Pemasaran Digital dan Teknologi Keuangan Sebagai Sarana Peningkatan Omset UMKM di Probolinggo. J-MAS (Jurnal Manajemen Dan Sains), 8(1), 113–118.
Hartono, H. R. P., & Kurniawan, Y. D. (2023). Financial Literacy. A Case Study in Madiun. Indonesian Journal of Business Analytics, 3(3), 665–672.
Hermawan, A., Gunardi, A., & Sari, L. M. (2022). Intention to Use Digital Finance MSMEs: The Impact of Financial Literacy and Financial Inclusion. Jurnal Ilmiah Akuntansi Dan Bisnis, 17 (1), 171–182.
Iqbal, M. A., Saeed, A., & Rehman, S. U. (2023). IMPACT OF FINANCIAL LITERACY ON FINANCIAL SATISFACTION: MEDIATING ROLES OF INVESTMENT DECISIONS & MODERATING ROLE OF RISK ATTITUDE. Journal of Social Research Development, 4(2), 274–283.
Khan, K. A., Çera, G., & Pinto Alves, S. R. (2022). Financial capability as a function of financial literacy, financial advice, and financial satisfaction. E & M Ekonomie a Management.
Lestari, E. D., Hamid, N. A., Rizkalla, N., Purnamaningsih, P., & Urus, S. B. T. (2022). The Effect of Financial Literacy, Cost of Technology Adoption, Technology Perceived Usefulness, and Government Support on MSMEs’ Business Resilience. Global Journal of Business Social Sciences Review (GATR-GJBSSR), 10(3).
Maurya, R., Mohta, A., & Shunmugasundaram, V. (2023). IMPACT OF FINANCIAL LITERACY ON INVESTORS: A SYSTEMATIC LITERATURE REVIEW USING PRISMA PROTOCOL. International Journal of Accounting & Finance Review, 14(1), 53–66.
Mirosea, N., & Hajar, I. (2023). Effect of Financial Literacy and Behaviour on Investment Decisions (Study on Southeast Sulawesi investors). KnE Social Sciences, 230–238.
Munthe, H., Butar, R. S. B., Purba, D. P., & Panggabean, M. S. (2023). Investment Planning Financial Literacy Education in Class I Community Institutions In Medan. GANDRUNG: Jurnal Pengabdian Kepada Masyarakat, 4(2), 1115–1121.
Murhadi, W. R., Kencanasari, F. R., & Sutejo, B. S. (2023). The Influence of Financial Literacy and Financial Interest on The Financial risk Tolerance of Investor in Indonesia. Journal of Law and Sustainable Development, 11(2), 1–16.
Oppong, C., Salifu Atchulo, A., Akwaa-Sekyi, E. K., Grant, D. D., & Kpegba, S. A. (2023). Financial literacy, investment and personal financial management nexus: Empirical evidence on private sector employees. Cogent Business & Management, 10(2), 2229106.
Pedraza, J. M. (2021). The micro, small, and medium-sized enterprises and its role in the economic development of a country. Business and Management Research, 10(1), 33.
Prasetya, A., Rahardjo, K., Mawardi, M. K., Hidayat, R. R., & Prakasa, Y. (2021). The mediation role of financial literation in ensuring MSMEs sustainability: An organizational characteristics perspective. JEMA: Jurnal Ilmiah Bidang Akuntansi Dan Manajemen, 18(1), 61–79.
Putri, A. J., & Bangun, M. Y. R. (2019). Identifying Environmental, Social, and Governance (ESG) Implementation towards Growth and Sustainability: A Case Study at Assisted Micro, Small, and Medium Enterprise (MSME) by Bank Indonesia.
Rohmanto, F., & Susanti, A. (2021). Pengaruh literasi keuangan, lifestyle hedonis, dan sikap keuangan pribadi terhadap perilaku keuangan mahasiswa. Ecobisma (Jurnal Ekonomi, Bisnis Dan Manajemen), 8(1), 40–48.
Romadhani, N. A., & Handini, S. (2023). The Influence of Financial Literacy and Financial Behavior on Student Investment Decisions In Surabaya In Investment Company Digital-Based. Economos: Jurnal Ekonomi Dan Bisnis, 6(1), 37–47.
Romero Álvarez, Y., & Ramírez Montoya, J. (2018). Relación de la toma de decisiones financieras con el nivel de conocimiento financiero en las mipymes. Suma de Negocios, 9(19), 36–44.
Rumini, D. A. (2020). Peran Literasi Keuangan Sebagai Prediktor Kinerja Dan Keberlanjutan Umkm Di Kabupaten Badung. INVENTORY: Jurnal Akuntansi, 4(1), 53–62.
Rustan, D. M. (2021). Financial Literacy, Financial Behavior and Financial Attitudes Towards Investment Decisions and Firm Bankruptcy. ATESTASI: Jurnal Ilmiah Akuntansi, 4(1), 79–87.
Sangeetha, R., Mathew, J., & Francline, S. C. (2017). Status of Financial Literacy Centers in Karnataka. Ushus Journal of Business Management, 16(4), 23–35.
Sufyati, H. S., Handayani, T., Marzuki, F., & Zaelani, A. H. (2022). Socialization of Islamic Financial Institution Literacy in MSMEs Upscale in DKI Jakarta. Mattawang: Jurnal Pengabdian Masyarakat, 3(4), 409–414.
Suseno, I., Yohanna, L., & Sondari, E. (2022). Islamic financial literacy and management for MSMEs. Proceeding of the International Conference on Family Business and Entrepreneurship, 2(1).
Tahir, M. S., & Richards, D. W. (2023). Consumer financial behavior and financial capability. A Research Agenda for Consumer Financial Behavior: 0, 245.
Tamara, D., Suhardiman, S., Rustam, S. S., & Kurniawan, B. (n.d.). Indonesian Millennial Generations’ Financial Literacy in Relation to its Behavior in Investment Decision.
Tambunan, T., Santoso, W., Busneti, I., & Batunanggar, S. (2021). The development of MSMEs and the growth of peer-to-peer (P2P) lending in Indonesia. International Journal of Innovation, Creativity and Change. Www. Ijicc. Net.
van Wyk, D., & Bishop, A. (2023). Exploratory study: Financial behaviour of qualified financial professionals during South Africa’s lockdown. Journal of Economic and Financial Sciences, 16(1), 10.
Xiao, J. J., Huang, J., Goyal, K., & Kumar, S. (2022). Financial capability: a systematic conceptual review, extension and synthesis. International Journal of Bank Marketing, 40(7), 1680–1717.
Yazfinedi, Y. (2018). Usaha Mikro, Kecil, dan Menengah Di Indonesia: Permasalahan dan Solusinya. Quantum: Jurnal Ilmiah Kesejahteraan Sosial, 14(1), 33–41.
Yuwono, W., Ramadhani, D. S., Sasmita, E. W., & Sihotang, W. H. (2023). Analysis of the Influence of the Role of Financial Literacy on Personal Financial Management. European Journal of Business and Management Research, 8(3), 57–61.
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