Improving MSME performance through financial literacy, financial technology, and financial inclusion

Abstract

Financial literacy is one of the key abilities and skills MSME business actors require to manage their finances and achieve successful business performance. This study's purpose was to analyze the impact of financial and technological literacy on improving MSME performance in Medan City and the mediation of this relationship by financial inclusion. The research had a quantitative descriptive methodology with an explanatory research approach. Data were collected from a sample of 100 business actors in Medan City. The data analysis technique used was Structural Equation Modelling - Partial Least Squares (SEM-PLS). The results showed that financial literacy, financial technology, and financial inclusion affected the performance of MSMEs in Medan City, and financial inclusion did not mediate the effects of financial literacy and financial technology on the performance of MSMEs in Medan City. The novelty of this research is its capacity to inform stakeholders of the importance of the financial literacy of MSME business actors; therefore, stakeholders must strive to educate MSME business actors on the importance of financial literacy.