The Relevance of Working Capital, Financial Literacy and Financial Inclusion on Financial Performance and Sustainability of Micro, Small and Medium-Sized Enterprises (MSMEs)

ABSTRACT : The development of the number of micro and small business actors in Indonesia is very fast, but currently Micro, Small and Medium-Sized Enterprises are still in the small business zone and have limitations to be developed. This research is oriented towards examining the relevance of working capital, literacy and financial inclusion in explaining the financial performance and business sustainability of Micro, Small and Medium-Sized Enterprises. A total of 310 MSMEs spread across 26 business groups were used as the unit of analysis of the 1,382 MSMEs in Makassar City. The results of the analysis of structural equation modeling with AMOS show that effective and efficient working capital management makes a real contribution to efforts to improve financial performance. On the other hand, it is an interesting fact that business actors’ financial literacy and inclusion have an impact on their low financial performance. Culinary business actors in their implementation have high working capital so that it has an impact on the high level of business sustainability. In a direct relationship, it is also found that business actors have financial literacy so that it is not able to increase business sustainability. This condition is also found in financial inclusion. MSMEs are proven to be able to produce high financial performance so that it has an impact on a high level of business sustainability. Relevance does not directly provide evidence if high working capital is proven as a trigger for business sustainability through financial performance. Different results are shown in the relevance of financial literacy and financial inclusion which based on the findings are not proven as a driver of business sustainability through financial performance.

KEYWORDS – Financial literacy, inclusion, performance, sustainability, working capital