Enhancing MSME Performance through Digital Financial Capability and Financial Literacy: A Multi-Group Analysis Based on Experience

Retno Fuji Oktaviani; Yesi Puspita Dewi

doi:10.61255/jeemba.v4i5.1875

Authors

Retno Fuji Oktaviani Universitas Budi Luhur, Indonesia
Yesi Puspita Dewi Universitas Budi Luhur, Indonesia

DOI:

https://doi.org/10.61255/jeemba.v4i5.1875

Keywords:

Digital Financial Capability, Financial Literacy, Financial Capability, MSME Performance, Business Experience

Abstract

Purpose – This study examines how digital financial capability and financial literacy influence the performance of Micro, Small, and Medium Enterprises (MSMEs), with financial capability serving as a mediating mechanism and business experience capturing heterogeneity across entrepreneurs.

Design/methodology/approach – A quantitative survey was conducted among 230 owners and managers of food and beverage MSMEs in South Tangerang. Data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) and Multi-Group Analysis (MGA) was subsequently employed to compare structural relationships between MSMEs with less than five years and those with five years or more of business experience.

Findings/Results – Digital financial capability and financial literacy significantly enhance financial capability, while digital financial capability and financial capability significantly improve MSME performance. Financial literacy has no significant direct effect on MSME performance; however, its effect becomes significant through financial capability, confirming the critical role of practical financial capability in translating financial knowledge into business outcomes

Originality/Value – Digital financial capability and financial literacy significantly enhance financial capability, while digital financial capability and financial capability significantly improve MSME performance. Financial literacy has no significant direct effect on MSME performance; however, its effect becomes significant through financial capability, confirming the critical role of practical financial capability in translating financial knowledge into business outcomes.

Abstract views: 9 ,

PDF downloads: 7

Downloads

Download data is not yet available.

References

Akhtar, F., Senadjki, A., & Vija Kumaran, V. (2025). Sustainability meets digital culture: the influence of ESG on financial performance in Malaysian manufacturing SMEs. Journal of Innovative Digital Transformation, 2(1), 90–108. https://doi.org/10.1108/jidt-10-2024-0031

Atahau, D. R. A., Madea Sakti, I., Namilana Rambu Hutar, A., Dolfriandra Huruta, A., & Kim, M. S. (2023). Financial literacy and sustainability of rural microfinance: The mediating effect of governance. Cogent Economics and Finance, 11(2), 1–30. https://doi.org/10.1080/23322039.2023.2230725

Azam, M. S. (2015). Diffusion of ICT and SME performance. In Advances in Business Marketing and Purchasing (Vol. 23A). https://doi.org/10.1108/S1069-096420150000023005

Azira, M., Mohd, S., & Jaffar, N. (2024). Effects of financial literacy and attitude toward money on financial capability among SMEs in Keyword s. 13(4), 832–844. https://doi.org/10.18488/11.v13i4.3919

Bakker, A. B., & Demerouti, E. (2017). Job Demands-Resources Theory: Taking Stock and Looking Forward. Journal of Occupational Health Psychology, 273–285.

Bandura, A. (1963). Social Learning and Personality Development. Holt, Rinehart & Winston.

Barney, J. B. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99–120. https://doi.org/https://doi.org/10.1177/014920639101700108

Changalima, I. A., Ismail, I. J., & Amani, D. (2025). Driving SME performance through technological absorptive capacity and e-business innovation. Sustainable Technology and Entrepreneurship, 4(1), 100089. https://doi.org/10.1016/j.stae.2024.100089

Dahri, A. S., Saraih, U. N. B., Rehman, J., Salameh, A. A., & Namisango, F. (2025). Deriving green competitive advantage in the SMEs: A sustainable firm performance perspective. Sustainable Futures, 9(March), 100618. https://doi.org/10.1016/j.sftr.2025.100618

Demarchi, M., Bonello, A., Francalanza, E., & Rauch, E. (2024). A Digital Twin for SMEs in the context of Industry 5.0. Procedia CIRP, 126, 242–247. https://doi.org/10.1016/j.procir.2024.08.333

Emami, A., & Dimov, D. (2017). Degree of innovation and the entrepreneurs’ intention to create value: a comparative study of experienced and novice entrepreneurs. Eurasian Business Review, 7(2), 161–182. https://doi.org/10.1007/s40821-016-0068-y

Finnbogason, S., & Melin, H. (2014). Technology-powered trade: Energising sustainable development in international trade. OECD Observer, (299), 23–24. https://www.scopus.com/inward/record.uri?eid=2-s2.0-84906776251&partnerID=40&md5=841cfdfd1f2494cc885a9608423dbd3d

Frimpong, S. E., Agyapong, G., Agyapong, D., & Murray, L. (2022). Financial literacy , access to digital finance and performance of SMEs : Evidence From Central region of Ghana. Cogent, 1–22.

Hair, J. F., Babin, B. J., & Anderson, R. E. (2019). Multivariate Data Analysis (8th ed.). Cengage Learning EMEA.

Idah, Y. M., & Pinilih, M. (2020). Strategi Pengembangan Digitalisasi UMKM. Prosiding Seminar Nasional Dan Call for Papers “Pengembangan Sumber Daya Pedesaan Dan Kearifan Lokal Berkelanjutan IX,” 9(1), 195–204.

Kementerian UMKM. (2025). Gambaran UMKM di Indonesia. KEMENKOP UKM.

Khan, K. A., & Mlouk, A. (2021). Improving financial capability : the mediating role of financial behaviour. ECONOMIC RESEARCH-EKONOMSKA ISTRAŽIVANJA, 34(1), 1265–1282. https://doi.org/10.1080/1331677X.2020.1820362

Khan, Khurra, A., Cera, G., & Alves, S. R. (2022). Financial Capability as a Function of Financial Literacy, Financial Advice, and Financial Satisfaction. E&M Economics and Management, 25(1), 143–160. https://doi.org/10.15240/tul/001/2022-1-009

Khurana, I., Dutta, D. K., & Singh Ghura, A. (2022). SMEs and digital transformation during a crisis: The emergence of resilience as a second-order dynamic capability in an entrepreneurial ecosystem. Journal of Business Research, 150(June), 623–641. https://doi.org/10.1016/j.jbusres.2022.06.048

Kulathunga, K. M. M. C. B., Ye, J., Sharma, S., & Weerathunga, P. R. (2020). How Does Technological and Financial Literacy Influence SME Performance : Mediating Role of. Information, 11(297), 1–20.

Kurniasari, F., Lestari, E. D., & Tannady, H. (2023). Pursuing Long-Term Business Performance: Investigating the Effects of Financial and Technological Factors on Digital Adoption to Leverage SME Performance and Business Sustainability—Evidence from Indonesian SMEs in the Traditional Market. Sustainability (Switzerland), 15(16), 1–20. https://doi.org/10.3390/su151612668

Latino, M. E. (2025). A maturity model for assessing the implementation of Industry 5.0 in manufacturing SMEs: learning from theory and practice. Technological Forecasting and Social Change, 214(January), 124045. https://doi.org/10.1016/j.techfore.2025.124045

Mai, B. T., Nguyen, P. V, Ton, U. N. H., & Ahmed, Z. U. (2024). Government policy, IT capabilities, digital transformation, and innovativeness in Post-Covid context: case of Vietnamese SMEs. International Journal of Organizational Analysis, 32(2), 333–356. https://doi.org/10.1108/IJOA-11-2022-3480

Masdupi, E., Firman, Rasyid, R., & Darni, M. O. (2024). Financial literacy and sustainability in SMEs: Do financial risk attitude, access to finance, and organizational risk-taking tolerance mediate? Asian Economic and Financial Review, 14(1), 43–58. https://doi.org/10.55493/5002.v14i1.4959

Mutya, T., & Ilankadhir, M. (2024). Does Digital Financial Literacy Matter for Current and Future Saving Behavior among Rural SME Entrepreneurs? Government Regulations Awareness as a Moderator. Theoretical and Practical Research in the Economic Fields, 15(4), 939–951. https://doi.org/10.14505/tpref.v15.4(32).12

Niazi, H. A., & Qodariah. (2025). Innovation Capability, Entrepreneurial Orientation, and Competitive Advantage on SME Performance: Evidence from Handicraft SMEs. Jurnal Ekonomika Dan Manajemen, 14(2), 214–222.

Nizam, K., & Rashidi, M. Z. (2024). Barriers to digital fi nancial inclusion and digital fi nancial services ( DFS ) in Pakistan : a phenomenological approach. Qualitative Research in Financial Markets. https://doi.org/10.1108/QRFM-11-2023-0271

Obadia, C., & Vida, I. (2024). Export marketing strategy and performance: A focus on SMEs promotion. International Business Review, 33(2), 102229. https://doi.org/10.1016/j.ibusrev.2023.102229

Oktaviani, R. F. (2024). Unpacking The Resistance of Traditional Market to Digital Payment: A Qualitatove Approach. Jurnal Aplikasi Ekonomi, Akuntansi Dan Bisnis, 6(2), 70–86. https://doi.org/doi.org/10.37641/riset.v6i2.2119

Oktaviani, R. F. (2025). Key Drivers of Live Streaming Adoption : An Empirical Analysis. Jurnal Aplikasi Manajemen, 23(1), 93–110.

Pak, T. Y., Chatterjee, S., & Choung, Y. (2026). Navigating digital finance: how digital financial literacy influences digital financial services use and benefits in Korea. Financial Innovation, 12(1). https://doi.org/10.1186/s40854-025-00820-w

Priyantoro, P., Ratnawati, K., & Aisjah, S. (2023). The effect of financial literacy on business performance through mediation of financial access and financial risk attitude. International Journal of Research in Business and Social Science (2147- 4478), 12(9), 275–287. https://doi.org/10.20525/ijrbs.v12i9.3024

Qiu, T., & Gao, L. (2026). Digital Finance, Innovation Value Chains, and the Formation of New Productivity: Evidence from Technology-Based SMEs. Sustainability (Switzerland), 18(6). https://doi.org/10.3390/su18062934

Rai, K. B., Bhattarai, P. C., Shrestha, B. K., & Takhar, A. (2025). Course of Becoming: Experiences of Micro And Small Entrepreneurs In Nepal. Journal of Small Business Strategy, 35(2), 96–110. https://doi.org/10.53703/001c.130867

Ratnawati, Rokhman, M. T. N., & Ningsih, A. A. T. (2025). The role of digital financial inclusion in improving financial literacy and financial well-being for business sustainability: Indonesian women’s export craft SMEs. Problems and Perspectives in Management, 23(2), 398–408. https://doi.org/10.21511/ppm.23(2).2025.28

Salmah, P., Tatmimah, I., Mubaarok, S. H., & Djadjuli, M. (2023). The Influence Financial Literacy, Financial Inclusion and Application Emkm Sak to MSME Performance ( Case Study in Panguragan Sub-District ). Jurnal Ekonomi, 12(4), 1256–1263.

Sekaran, U., & Bougie, R. (2016). Research Methods for Business: A Skill-Building Approach. In Willey. https://doi.org/10.1108/lodj-06-2013-0079

Suryani, T., Iramani, & Lindiawati. (2017). Financial Capability of SMEs in Indonesia and the Solutions by Using Financial Application. International Business Management, 11(7), 1499–1503.

Tahir, M. S., Ahmed, A. D., & Richards, D. W. (2021). Financial literacy and financial well-being of Australian consumers : a moderated mediation model of impulsivity and financial capability. International Journal of Bank Marketing, 39(7), 1377–1394. https://doi.org/10.1108/IJBM-09-2020-0490

Ullah, M. R., Tahir, S. H., Ahmed, M., & Khan, M. J. (2025). the Role of Digitalization and Digital Capabilities in Financial Performance: a Multilayer Perceptron-Based Hybrid Sem-Anns Approach. International Journal of Business and Society, 26(2), 548–569. https://doi.org/10.33736/ijbs.7878.2025

Vieira, K. M., Matheis, T. K., & Lehnhart, E. dos R. (2024). Digital Financial Capability Scale. Journal of Risk and Financial Management, 17(9). https://doi.org/10.3390/jrfm17090404

Wang, Y. (2024). Digital Financial Capability and Entrepreneurship in China: A Digital Economy Perspective. Sustainability (Switzerland), 16(16). https://doi.org/10.3390/su16166885

Whajah, A., & Adenutsi, D. E. (2024). Financial Literacy and Performance of Small and Medium-Scale Enterprises in Ghana : Exploring the Interplay of Financial Risk Attitude and Access to Finance. African Journal of Business and Economic Research (AJBER), 19(1), 439–461.

Xia, Y., & Xu, G. (2025). Can Digital Financial Inclusion Promote the Sustainable Growth of Farmers’ Income?—An Empirical Analysis Based on Panel Data from 30 Provinces in China. Sustainability (Switzerland), 17(4). https://doi.org/10.3390/su17041448

Xiao, J. J., Huang, J., Goyal, K., & Kumar, S. (2022). Financial capability : a systematic conceptual review , extension and synthesis. International Journal of Bank Marketing, 40(7), 1680–1717. https://doi.org/10.1108/IJBM-05-2022-0185

Yakob, S., Zalila, R., Rusli, A., & Yakob, R. (2021). Financial Literacy and Financial Performance of Small and Medium-sized Enterprises. The South East Asian Journal of Management, 15(1), 72–96.

Zaimovic, A., Omanovic, A., Dedovic, L., & Zaimovic, T. (2025). The effect of business experience on fintech behavioural adoption among MSME managers: the mediating role of digital financial literacy and its components. Future Business Journal, 11(1). https://doi.org/10.1186/s43093-025-00432-x