Does Financial Literacy a Stimulus for Improving the Farmer's Welfare in Serdang Bedagai, Indonesia?

Abstract

Serdang Bedagai regency is one of the regions in North Sumatra Province that has a high source of income in agriculture. Nevertheless, most farmers have a low level of welfare, marked by the widespread practice of borrowing money from illegal intermediaries or pawnbrokers as an alternative funding source for farmers to meet urgent needs such as consumption, education, and health. This condition is detrimental to farmers due to the lack for more financial understanding, so making the right financial decisions is difficult. This study examines the effect of Financial Literacy, Financial Inclusion on the Welfare of Farmers. The population is farmers who cultivate agricultural land in the form of rice fields in Serdang Bedagai. This study uses a questionnaire distributed to Farmers in Serdang Bedagai. A total of 202 respondents participated in this study and were collected using convenience sampling. The data processing method used is Structural Equation Modeling (SEM) with the alternative Partial Least Square (PLS) to determine the direct and indirect effect of financial literacy on the welfare of farmers through financial inclusion. This study found that financial inclusion has a positive and significant effect on the welfare of farmers in the Serdang Bedagai district. Financial literacy directly has a positive and significant impact on the welfare of farmers. In comparison, financial literacy does not significantly influence the welfare of farmers. However, financial inclusion can mediate the effect of financial literacy on the Welfare of Serdang Bedagai Farmers.