Sustainability and Performance of Small and Medium Business: the Role of Financial Literature
DOI:
https://doi.org/10.26668/businessreview/2023.v8i5.1048Keywords:
Financial Literacy, Small and Medium Enterprise Per¬formance, Small and Medium Enterprise Sus¬tainabilityAbstract
Purpose: The purpose of this study is to examine the relationship between financial literacy, the sustainability of SMEs and the performance of SMEs.
Theoretical framework: SMEs must have resilience and strength in maintaining the continuity of their business which is exposed to risks that must be faced (Kot, 2008 and Southiseng, and Walsh, 2010). Indicators of the success of SMEs can be measured through the business continuity of SMEs and the performance of SMEs. However, this has challenges, especially related to financial literacy in the use of financial products and services both digital and non-digital. Therefore, the study needs to be developed to gather more information about the role of financial literacy to the sustainability of SMEs and the performance of SMEs.
Design/methodology/approach: This study uses quantitative research with primary data and secondary data. The population in this study were all SMEs and samples were taken using the saturated sample technique as many as 82 registered SMEs and 50 unregistered SMEs. The data analysis technique in this study used Structural Equation Modeling (SEM) with SmartPLS.
Findings: The results of this study indicate the contribution of financial literacy to the SMES’s sustainability and performance. Financial literacy has a positive effect on the sustainability of SMEs. Research also shows that financial literacy has a positive effect on the performance of SMEs.
Research, Practical & Social implications: The future research should highlight other essential factors that could contribute the SME’s sustainability and performance such as halal branding and label as trending factors nowadays.
Originality/value: The results indicate the importance role of financial literacy on the sustainability and performance of SMEs especially SME’s financial management would determine the successful of SME’s livelihood.
Downloads
References
Amelia,, Y., P. Nauli and N. Desriani, 2020, The impact of financial literacy on the performance and sustainability of SMEs in Indonesia, The Future Opportunities And Challenges Of Business In Digital Era 4.0, Taylor and Francis pp. 299-302. DOI:10.1201/9780367853778-77
Chong, Wei Ying, Hong, Patrick Hon Kin and Teck,, Tan Seng, 2022, Small And Medium-Sized Businesses In Malaysia Can Look Forward To The Future Of Co-Creation, A Literature Review, International Journal of Professional Business Review, V. 7, n. 6, Doi: https://doi.org/10.26668/businessreview/2022.v7i6.e583
Eniola, A. A. and Entebang, H, 2016, Financial literacy and SME firm performance, International Journal of Research Studies in Management, Volume 5 Number 1, April, pp. 31-43. DOI: 10.5861/ijrsm.2015.1304
Eniola, A. A., & Entebang, H., 2015, SME firm performance-financial innovation and challenges. Procedia - Social and Behavioral Sciences, 195, 334-342. http://dx.doi.org/10.1016/j.sbspro.2015.06.361
Fatoki, O.,2014, The Financial Literacy of Micro Entrepreneurs in South Africa. Journal of Social Sciences, 40, 151–158. DOI:10.1080/09718923.2014.11893311
Gavigan, K., 2010, Show Me The Money Resources:Financial Literacy For 21st Century Learners, Library Media Connection.
Hanggraeni, D, Slusarczyk, B., Sulung, L A K and Subroto, A, 2019, The Impact of Internal, External and Enterprise Risk Management on the Performance of Micro, Small and Medium Enterprises, Sustainability, 11, 2172, www.mdpi.com/journal/sustainability https://doi.org/10.3390/su11072172.
Hitt, M., Ireland, R., Sirmon, D. and Trahms, C., 2011. Strategic entrepreneurship: Creating value for individuals, organizations, and society. Academy of Management Perspectives. SSRN Electronic Journal, http://dx.doi.org/10.2139/ssrn.1994491
Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2007. Strategic management: Globalization and competitiveness. Mason, OH: Thomson South-Western. ISBN 0324364342, 9780324364347
Hussin, Nik Syuhailah Nik and Aziz, Zuraimi Abdul, 2021, Socioeconomic Developoment On Poverty Alleviation Of Women Entrepreneurship, International Journal of Professional Business Review, V. 6, n.1, Doi: https://doi.org/10.26668/businessreview /2021.v6i1.283
Jati, H., Rosary, P. E., Fanggidae , A.H.J., and Makatita, R. F., 2021, The Importance Of Financial Literacy And Technological Literacy For The Sustainability Of The Culinary Business In Kota Kupang During The Covid -19 Pandemic, International Journal of Economics, Business and Management Research, Vol. 5, No. 01. ISSN: 2456-7760, https://ijebmr.com/uploads/pdf/archivepdf/2021/IJEBMR_670.pdf
Kor, Yasemin Y., Mahoney, Joseph T. and Michael, Steven C., 2007, Resources, Capabilities and Entrepreneurial Perceptions, Journal of Management Studies, 44:7 November. https://doi.org/10.1111/j.1467-6486.2007.00727.x
Kot, S. 2018, Sustainable Supply Chain Management in Small and Medium Enterprises. Sustainability, 10, 1143. https://doi.org/10.3390/su10041143
Lusardi, A., and Mitchell, O. S. , 2013, The economic importance of financial literacy. Journal of Economic Literature, 52, 65. Journal of Economic Literature 2014, 52(1), 1–40 http://dx.doi.org/10.1257/jel.52.1.1
Morrison, A., 2006, A contextualisation of entrepreneurship, International Journal of Entrepreneurial Behavior & Research, Vol. 12 No. 4, pp. 192-209. http://dx.doi.org/10.1108/13552550610679159
Mwithiga, E. M., 2016, Financial Literacy And Enterprise Performance Among Owner-Managed Ict Smes In Nairobi County, A Research Report Submitted To The Chandaria School Of Business In Partial Fulfilment Of The Requirement For The Degree Of Master Of Business Administration (MBA), United States International University – Africa. https://erepo.usiu.ac.ke/bitstream/handle/11732/2725/ErnestMM625675.pdf?sequence=1&isAllowed=y
Nikitina, A., Abraimova, A., and Shalaieva, A, 2020, Analysis Of Small Business Role In The Economy Of Ukraine In Globalization: Problems And Ways Of Improvement, Eastern Europe: Economy, Business And Governance, 1 (24). DOI:10.32782/easterneurope.24-3
Parmitasari, R.D.A and Alim Syariati, 2020, Manajemen Strategi: Pengantar [Strategic Management: Introduction], Pusaka Al Maida, Indonesia, ISBN 978-623-226-168-6
Patrick, C., 2015. The Effect Of Financial Literacy On Performance Of Small And Medium Enterprises In Trans Nzoia County, Thesis, School Of Business, University Of Nairobi. http://erepository.uonbi.ac.ke/bitstream/handle/11295/93447/Cherugong_The%20Effect%20Of%20Financial%20Literacy%20On%20Performance%20Of%20Small%20And%20Medium%20Enterprises%20In%20Trans%20Nzoia%20County.pdf?sequence=4
Putri, H.R. Bailusy, M.N. and Hadady, H. 2021, Generation Z: Financial Literacy, Sharia Financial Literacy, Attitude, and Behavior, International Journal of Applied Business and International Management, Volume 6, Issue 3, pp. 46-55.
Rudenko, L., Zaitseva, N., Larionova, A., Chudnovskiy, A. and Vinogradova, M., 2015, Socio Economic Role of Service Sector Small Business in Sustainable Development of the Russian Economy, European Research Studies, Volume XVIII, Issue 3, pp. 223 – 238, https://go.gale.com/ps/i.do?id=GALE%7CA443990836&sid=googleScholar&v=2.1&it=r&linkaccess=abs&issn=11082976&p=AONE&sw=w&userGroupName=anon%7E2a974ea5
Savlovschi, L. I. and Robu, N. R., 2011, The Role of SMEs in Modern Economy, Economia. Seria Management, Vol. 14, issue 1, 277-281, http://management.ase.ro/reveconomia/2011-1/25.pdf
Southiseng, N. and Walsh, J, 2010, Competition and Management Issues of SME Entrepreneurs in Laos: Evidence from Empirical Studies in Vientiane Municipality, Savannakhet and Luang Prabang. Asian Journal. Bussiness Management., 2, 57–72. https://www.researchgate.net/profile/John-Walsh-42/publication/49582902_Competition_and_Management_Issues_of_SME_Entrepreneurs_in_Laos_Evidence_from_Empirical_Studies_in_Vientiane_Municipality_Savannakhet_and_Luang_Prabang/links/5f2a3a7b458515b729036023/Competition-and-Management-Issues-of-SME-Entrepreneurs-in-Laos-Evidence-from-Empirical-Studies-in-Vientiane-Municipality-Savannakhet-and-Luang-Prabang.pdf
Thompson, A. A JR, Strickland, A.J and Gamble, John E., 2009, Crafting & Executing Strategy (The Quest For Competitive Advantage: Concepts And Cases), Mc Graw Hill.
Treptow, E., 2014, Financial Intelligence: A Manager’s Guide to Knowing What the Numbers Really Mean by Karen Berman and Joe Knight with John Case: Boston, MA, Harvard Business Review Press, 2013, 304 pp., $27.00, ISBN 978-1-4221-4411-4, Taylor & Francis.
Usama, Khadija M. and Yusoff, W, 2018, The Relationship Between Entrepreneurs’ Financial Literacy And Business Performance Among Entrepreneurs Of Bauchi State Nigeria, International Journal of Entrepreneurship and Business Innovation, Vol.1, No.1, pp.15-26.
Wagner, M., 2010, The Role Of Corporate Sustainability Performance For Economic Performance: A Firm-Level Analysis Of Moderation Effects, Ecological Economics, 69, pp. 1553–1560, https://doi.org/10.1016/j.ecolecon.2010.02.017
Widayanti, R., Damayanti, R., dan Marwanti, F., 2017, Pengaruh Financial Literacy Terhadap Keberlangsungan Usaha (Business Sustainability) Pada UMKM Desa Jatisari [The Effect of Financial Literacy on Business Sustainability in MSMEs in Jatisari Village]. Jurnal Ilmiah Manajemen dan Bisnis, Vol. 18 No. 2, pp. 153 – 163.
DOI: http://dx.doi.org/10.30596%2Fjimb.v18i2.1399
Winarsih, Mutoharoh, Tahar, E. dan I., Azis, 2020, The Role of Fintech and Financial Literacy on SME’s Sustainability, ICIC 2020: Proceedings of the 1st International Conference on Islamic, August 27, Semarang, http://dx.doi.org/10.4108/eai.27-8-2020.2303270
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Rika Dwi Ayu Parmitasari, Rusnawati
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.
Authors who publish in this journal agree to the following terms: the author(s) authorize(s) the publication of the text in the journal;
The author(s) ensure(s) that the contribution is original and unpublished and that it is not in the process of evaluation by another journal;
The journal is not responsible for the views, ideas and concepts presented in articles, and these are the sole responsibility of the author(s);
The publishers reserve the right to make textual adjustments and adapt texts to meet with publication standards.
Authors retain copyright and grant the journal the right to first publication, with the work simultaneously licensed under the Creative Commons Atribuição NãoComercial 4.0 (http://creativecommons.org/licenses/by-nc/4.0/), which allows the work to be shared with recognized authorship and initial publication in this journal.
Authors are allowed to assume additional contracts separately, for non-exclusive distribution of the version of the work published in this journal (e.g. publish in institutional repository or as a book chapter), with recognition of authorship and initial publication in this journal.
Authors are allowed and are encouraged to publish and distribute their work online (e.g. in institutional repositories or on a personal web page) at any point before or during the editorial process, as this can generate positive effects, as well as increase the impact and citations of the published work (see the effect of Free Access) at http://opcit.eprints.org/oacitation-biblio.html
