IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v16y2023i1p52-d1037176.html
   My bibliography  Save this article

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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Maria Widyastuti & Deograsias Yoseph Yustinianus Ferdinand & Yustinus Budi Hermanto, 2023. "Strengthening Formal Credit Access and Performance through Financial Literacy and Credit Terms in Micro, Small and Medium Businesses," JRFM, MDPI, vol. 16(1), pages 1-14, January.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:1:p:52-:d:1037176
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/16/1/52/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/16/1/52/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David McKenzie & Christopher Woodruff, 2017. "Business Practices in Small Firms in Developing Countries," Management Science, INFORMS, vol. 63(9), pages 2967-2981, September.
    2. Marcel Fafchamps & Christopher Woodruff, 2017. "Identifying Gazelles: Expert Panels vs. Surveys as a Means to Identify Firms with Rapid Growth Potential," The World Bank Economic Review, World Bank, vol. 31(3), pages 670-686.
    3. Alberto Burchi & Bogdan Włodarczyk & Marek Szturo & Duccio Martelli, 2021. "The Effects of Financial Literacy on Sustainable Entrepreneurship," Sustainability, MDPI, vol. 13(9), pages 1-21, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David McKenzie, 2017. "Identifying and Spurring High-Growth Entrepreneurship: Experimental Evidence from a Business Plan Competition," American Economic Review, American Economic Association, vol. 107(8), pages 2278-2307, August.
    2. Yuki Higuchi & Vu Hoang Nam & Tetsushi Sonobe, 2023. "Do Management Interventions Last? Evidence from Vietnamese SMEs," Working Papers DP-2022-42, Economic Research Institute for ASEAN and East Asia (ERIA).
    3. Henrik Hansen & John Rand & Finn Tarp & Neda Trifkovic, 2021. "On the Link Between Managerial Attributes and Firm Access to Formal Credit in Myanmar," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(6), pages 1768-1794, December.
    4. Delius, Antonia & Sterck, Olivier, 2024. "Cash transfers and micro-enterprise performance: Theory and quasi-experimental evidence from Kenya," Journal of Development Economics, Elsevier, vol. 167(C).
    5. Lall, Saurabh A. & Chen, Li-Wei & Roberts, Peter W., 2020. "Are we accelerating equity investment into impact-oriented ventures?," World Development, Elsevier, vol. 131(C).
    6. González-Uribe, Juanita & Reyes, Santiago, 2021. "Identifying and boosting “Gazelles”: Evidence from business accelerators," Journal of Financial Economics, Elsevier, vol. 139(1), pages 260-287.
    7. Vittorio Bassi & Raffaela Muoio & Tommaso Porzio & Ritwika Sen & Esau Tugume, 2022. "Achieving Scale Collectively," Econometrica, Econometric Society, vol. 90(6), pages 2937-2978, November.
    8. Bassi, Vittorio & Nyshadham, Anant & Tamayo, Jorge & Adhvaryu, Achyuta, 2020. "No Line Left Behind: Assortative Matching Inside the Firm," CEPR Discussion Papers 14554, C.E.P.R. Discussion Papers.
    9. Atonu Rabbani, 2017. "Can Leaders Promote Better Health Behavior? Learning from a Sanitation and Hygiene Communication Experiment in Rural Bangladesh," Working Papers id:11904, eSocialSciences.
    10. Axel Demenet, 2016. "Does Managerial Capital also Matter Among Micro and Small Firms in Developing Countries?," Working Papers DT/2016/12, DIAL (Développement, Institutions et Mondialisation).
    11. Axel Demenet & Quynh Hoang, 2018. "How important are management practices for the productivity of small and medium enterprises?," WIDER Working Paper Series 69, World Institute for Development Economic Research (UNU-WIDER).
    12. Christopher Cornwell & Ian M. Schmutte & Daniela Scur, 2021. "Building a Productive Workforce: The Role of Structured Management Practices," Management Science, INFORMS, vol. 67(12), pages 7308-7321, December.
    13. Ubfal,Diego Javier, 2024. "What Works in Supporting Women-Led Businesses ?," Policy Research Working Paper Series 10744, The World Bank.
    14. Catia Batista & Sandra Sequeira & Pedro C. Vicente, 2022. "Closing the Gender Profit Gap?," Management Science, INFORMS, vol. 68(12), pages 8553-8567, December.
    15. Dalton,Patricio S. & Ruschenpohler,Julius & Zia,Bilal Husnain, 2018. "Determinants and dynamics of business aspirations : evidence from small-scale entrepreneurs in an emerging market," Policy Research Working Paper Series 8400, The World Bank.
    16. Neba Bhalla & Rakesh Kumar Sharma & Inderjit Kaur, 2023. "Effect of Goods and Service Tax System on Business Performance of Micro, Small and Medium Enterprises," SAGE Open, , vol. 13(2), pages 21582440231, June.
    17. Mayra Buvinic & Megan O’Donnell, 2017. "Gender Matters in Economic Empowerment Interventions: A Research Review," Working Papers id:11926, eSocialSciences.
    18. Marcel Fafchamps & Simon Quinn, 2017. "Aspire," Journal of Development Studies, Taylor & Francis Journals, vol. 53(10), pages 1615-1633, October.
    19. Diao, Xinshen & Kweka, Josaphat & McMillan, Margaret, 2018. "Small firms, structural change and labor productivity growth in Africa: Evidence from Tanzania," World Development, Elsevier, vol. 105(C), pages 400-415.
    20. Igarashi, Takiko & Takeda, Asami & Truong, Hoa T. & Sonobe, Tetsushi, 2022. "Evolving Impacts of the COVID-19 Pandemic on Micro, Small, and Medium-Sized Enterprises in Asia," ADBI Working Papers 1286, Asian Development Bank Institute.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:16:y:2023:i:1:p:52-:d:1037176. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.