FINANCIAL INCLUSION AND FINANCIAL TECHNOLOGY: THE IMPACT ON FINANCIAL PERFORMANCE WITH THE MEDIATION ROLE OF FINANCIAL LITERACY IN MSMES

Abstract

This study analyzes the role of financial literacy in the relationship between financial inclusion and financial technology on the financial performance of MSMEs in the food and beverage sector in Sleman Regency, Special Region of Yogyakarta, Indonesia. Data were obtained from 400 purposively selected MSME owners via a structured online questionnaire. Structural Equation Modeling (SEM) was employed to analyze the data. Findings show that both financial inclusion and financial technology positively impact financial literacy and financial performance. Furthermore, financial literacy significantly mediates the relationship between financial inclusion and financial technology on financial performance. The study contributes practically by highlighting the importance of enhancing financial literacy to optimize the benefits of financial services and supports policy directions to expand financial inclusion. Furthermore, Importance Performance Map Analysis (IPMA).  The IPMA results show four indicators (selecting appropriate financial products, sound financial management, ease of transactions using fintech, and increased income due to using fintech) in the quadrant of high importance but low performance.  Improvements in those four indicators will significantly impact the target construct (financial performance).