Factors Influencing Tangerang City MSMEs' Financial Literacy

Abstract

Financial literacy is the knowledge about financial product and services. It is also defined as financial management skills that one should have in order to reach financial welfare, especially for Micro, Small, and Medium Enterprises. The purpose of this study is to analyze the effects of income, educational level, gender, age, and length of business on the financial literacy level of MSMEs in Tangerang City. This study used quantitative methods and used Proportionate Stratified Random Sampling as the sampling technique with 100 MSMEs as a sample. It was conducted in 11 subdistricts in Tangerang City – Tangerang, Batuceper, Larangan, Karawaci, Cibodas, Cipondoh, Pinang, Ciledug, Karang Tengah, Neglasari, and Periuk. The study used Multiple Linear Regression as an analysis technique. Based on the analysis carried out using the SPSS application, the results showed that: (i) the financial literacy index of MSMEs in Tangerang City was an average of 76.15%; (ii) income has a positive and significant influence on financial literacy level on MSMEs in Tangerang City; (iii) education level has a positive and significant influence on the financial literacy level; (iv) gender has no significant influence on the financial literacy level; (v) age has a positive and significant influence on the financial literacy level; and (vi) the length of business has a positive and significant influence on financial literacy level. The implication of this study are: MSMEs can increase their financial literacy level by making monthly financial records using digital technology and increase their ability to adapt with financial technology. Cooperatives and Small and Medium Enterprise Office can conduct more financial literacy workshop and increase MSMEs’ access to technology and financial product and services in order to increase financial literacy level of MSMEs in Tangerang city so that MSMEs can reach financial welfare. Keywords: MSMEs, financial literacy, income, educational level, gender, age, and the length of business