Sustainability Based MSME Financing Policy Model: Integrating Leadership, Financial Literacy, and Financing Access in East Java

Abstract

This study aims to formulate an integrated financing policy model for micro, small, and medium enterprises (MSMEs) in Indonesia by incorporating sustainable leadership and financial literacy dimensions. Although prior studies examine MSME financing separately from leadership and sustainability aspects, limited research develops a comprehensive structural framework linking policy design, behavioral financial capability, and business sustainability. This study employs a quantitative survey approach involving MSME actors across various sectors in Indonesia, using validated structured questionnaires and structural equation modeling (SEM) for data analysis. The findings reveal that financing policy significantly improves access to formal financing, enhances financial literacy, and promotes sustainable finance practices. Financial literacy mediates the relationship between financing policy and MSMEs’ financing access, while sustainability-oriented leadership strengthens policy effectiveness in fostering an inclusive and responsible financing ecosystem. The novelty of this study lies in integrating policy, leadership, and financial capability into a unified model that explains MSME sustainability. The results provide empirical support for adaptive, literacy-driven financing policies to enhance MSME competitiveness and resilience.