Strengthening Formal Credit Access and Performance through Financial Literacy and Credit Terms in Micro, Small and Medium Businesses

Maria Widyastuti (), Deograsias Yoseph Yustinianus Ferdinand and Yustinus Budi Hermanto
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Maria Widyastuti: Fakultas Manajemen, Universitas Katolik Darma Cendika, Surabaya 60200, Indonesia
Deograsias Yoseph Yustinianus Ferdinand: Fakultas Manajemen, Universitas Katolik Darma Cendika, Surabaya 60200, Indonesia
Yustinus Budi Hermanto: Fakultas Manajemen, Universitas Katolik Darma Cendika, Surabaya 60200, Indonesia

JRFM, 2023, vol. 16, issue 1, 1-14

Abstract: This study aims to test financial literacy and credit conditions in determining formal credit access to determine the performance of MSMEs. This research includes the type of associative research that is accompanied by hypothesis testing. This research was conducted on MSMEs of as many as 324 creative industry players in four cities in East Java (Mojokerto, Pasuruan, Gresik, and Sidoarjo) with a sample size of 100 actors who had accessed formal credit using the stratified random sampling method for data collection. The results of Smart PLS analysis show that financial literacy and credit terms directly and significantly affect access to formal credit and MSME performance; formal credit access directly and significantly affects MSME performance. Likewise, financial literacy and credit terms indirectly affect the performance of MSMEs. These results mean that financial literacy and credit terms have a strategic role in explaining why access to formal credit is growing and is attracting MSMEs to strengthen capital to improve performance.

Keywords: formal credit access; performance; financial literacy; credit terms (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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