The Role of Financial Literacy in The Financial Performance of MSMEs

DOI

10.2991/978-94-6239-626-5_9How to use a DOI?

Keywords

Financial literacy; Financial performance; MSME’s

Abstract

This exploratory study delves into the critical role of financial literacy in influencing SME performance from a sustainable economic resilience perspective in emerging markets. Drawing on the knowledge-based view (KBV), theory of planned behavior, and resource-based theory, financial literacy is theorized as a strategic knowledge asset enabling SME owners and managers to make confident financial decisions, manage risks, and allocate resources efficiently. The research employs a meta-analysis of studies from 2020-2024, including Yakob et al. (2021), Kulathunga et al. (2020), Hanasri et al. (2023), Astari and Candraningrat (2022), Wijaya et al. (2023), and Pratama et al. (2024). A mixed-methods approach analyzes quantitative survey and questionnaire data from over 500 SME stakeholders across diverse national contexts using advanced statistical techniques such as partial least squares-structural equation modeling (PLS-SEM) and regression analysis. Key findings reveal that higher financial literacy levels are significantly associated with improved financial performance indicators, including return on assets (ROA), sales growth, and efficient liability management. Financial literacy moderates the relationship between external factors like fintech adoption, microfinance access, and digital transformation with SME outcomes, amplifying technological disruptions while mitigating economic shocks. The impact of ICT literacy is context-specific, more pronounced in urban SMEs than rural ones, and influenced by demographic factors such as education and experience. Theoretical contributions include operationalizing KBV by positioning financial literacy as a dynamic capability for competitive advantage. Practical implications advocate for government-sponsored financial education programs, fintech training workshops, and policy frameworks to foster inclusive financial ecosystems. Limitations, such as self-report bias and regional specificity, suggest avenues for future research, including longitudinal studies, cross-cultural comparisons, and causality experiments. Overall, enhancing financial literacy empowers SMEs to navigate volatile economic terrains, promoting economic development and poverty reduction in emerging countries.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Dewi Anjani
PY  - 2026
DA  - 2026/04/15
TI  - The Role of Financial Literacy in The Financial Performance of MSMEs
BT  - Proceedings of the 1st International Conference on Business, Economic, and Social Sustainability (ICOBES 2025)
PB  - Atlantis Press
SP  - 118
EP  - 130
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-626-5_9
DO  - 10.2991/978-94-6239-626-5_9
ID  - Anjani2026
ER  -