Determinants of Indonesian MSMEs’ Green Investment Choices Towards Inclusive and Sustainable Economic Growth

Abstract

MSMEs are catalysts for economic growth in both rural and urban areas. In light of this, MSMEs should have equitable access to the numerous resources required for their innovation. However, environmental sustainability should also be considered with these developments. Therefore, it is necessary to conduct a study on the factors that influence MSMEs’ selection of green investments. This study analyses whether financial literacy and financial behaviour could determine the green investment choices in micro, small and medium enterprises (MSMEs). Data collection in this study used a survey technique for MSMEs in Magelang and received 195 respondents. Data was then analysed using multiple regression analysis. The results show that positive financial behaviour is related to more sound green investment decisions of MSMEs owners. In addition, this study also finds educational background influences the selection of MSMEs green investments. Financial behaviour can have an impact on investment innovation because MSMEs owners who pay more attention to their financial position will be able to manage risk tolerance better, so they are more attracted to more green investments. The results of this study will corroborate previous research showing that individuals with greater financial behaviour make reasonable financial decisions based on their risk preferences