Abstract
This study aims to investigate the effects of financial and digital literacy on growth of small and medium enterprises (SMEs) managed by women in Indonesia. Data were collected through questionnaires of women entrepreneurs in Palembang, Indonesia. For the purpose of comparison, data of men entrepreneurs were also collected. The variables employed are latent variables such as financial literacy, digital literacy, SME’s growth which are derived from a series of questions to indicate each variable. A total of 240 women and 240 men were analyzed using structural equation modelling (SEM). The results reveal that both financial and digital literacy had positive and significant effects on return on assets. On the other hand, only digital literacy had positive and significant effects on growth. The findings further evidence that women had a lower level of digital knowledge compared to men. Furthermore, the results show that in the short term, financial literacy and digital literacy are important to understand and implement. But in the long run, digital literacy plays an important role because it impacts business growth. This is in line with an increasingly fierce market competition where the market is also shifting from traditional markets to modern markets. Not only the market, but consumers are also shifting from traditional consumers to digital consumers.
Highlights
The small business sector is one of the crucial keys to supporting the growth of the Indonesian economy
Based on the prospects and problems explained above, this study aims to empirically investigate the extant financial and digital literacy that affects return on asset (ROA) and growth in the context of small and medium enterprises (SMEs) owned by women in Indonesia
To grow and survive the tight competition, digital literacy is highly needed in the digital economy
Summary
The small business sector is one of the crucial keys to supporting the growth of the Indonesian economy. Flexibility, as well as low start-up and operating costs, has enabled small and medium enterprises (SMEs) to spring up, to reposition and adjust themselves quickly in response to market and economic changes. They expand or contract in a short space of time. The small business sector has survived through the economic and financial crisis. Despite its ups and downs, the small business sectors still encounter some challenges that are the lack of access to market information and technology, the lack of human resources, the lack of access to capital, and the lack of financial and digital literacy (Basyith, Idris, & Fauzi, 2014; Fatimah, Fauzi, & Basyith, 2014; Basyith, Fatimah, & Idris, 2016)
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