MSMEs Tax Reform for Financial Sustainability: Financial Literacy, Financial Capability and Capital Structure

Authors

  • Sri Hartaty Politeknik Negeri Sriwijaya
  • Anggeraini Oktarida Politeknik Negeri Sriwijaya

DOI:

https://doi.org/10.58812/wsaf.v2i01.438

Keywords:

Capital Structure, Financial, Indonesia, Literacy, MSMEs, Sustainability, Tax Reform

Abstract

In light of tax sector reforms, this study explores the dynamics of Micro, Small, and Medium-Sized Enterprises (MSMEs), with a particular emphasis on the impact of capital structure, financial literacy, and financial aptitude on these businesses' long-term viability. Structural Equation Modelling with Partial Least Squares (SEM-PLS) analysis was performed on a sample of 231 MSMEs. The findings show a strong positive correlation between capital structure and financial sustainability, financial literacy and capability, and financial capability and capital structure. For educators, practitioners, and policymakers looking to improve MSMEs' financial resilience in the face of changing tax sector reforms, the study offers insightful information.

References

A. S. Atichasari and A. Marfu, “The Influence of Tax Policies on Investment Decisions and Business Development of Micro, Small, and Medium-Sized Enterprises (MSMEs) and its Implications for Economic Growth in Indonesia”.

B. Banerjee, “CHALLENGES AND OPPORTUNITIES FOR MICRO, SMALL, AND MEDIUM ENTERPRISES: NAVIGATING THE BUSINESS LANDSCAPE,” The American Journal of Interdisciplinary Innovations and Research, vol. 5, no. 05, pp. 13–17, 2023.

M. Amin, R. Saleh, M. Masitah, and N. Ufayani, “MICRO, SMALL, AND MEDIUM ENTERPRISES (MSMES) IN PROSPERITY BUSINESS ACTORS DURING THE COVID-19 PANDEMIC IN THE VILLAGE ANAIWOI,” International Journal of Business, Law, and Education, vol. 4, no. 2, pp. 336–351, 2023.

T. F. F. Leiwakabessy, L. Ikbal, J. R. Sihasale, M. S. Risambessy, L. Samale, and G. M. C. Ananda, “SOSIALISASI DAN PELATIHAN DIGITAL MARKETING BAGI PELAKU UMKM NEGERI HALONG,” Pattimura Mengabdi: Jurnal Pengabdian Kepada Masyarakat, vol. 1, no. 3, pp. 158–163, 2023.

T. A. Fomum and P. Opperman, “Financial inclusion and performance of MSMEs in Eswatini,” International Journal of Social Economics, no. ahead-of-print, 2023.

O. I. P. Sari and A. Z. Arifin, “Pengaruh financial technology adoption capability dan financial literacy terhadap business sustainability,” Jurnal Manajemen Bisnis dan Kewirausahaan, vol. 7, no. 3, pp. 571–581, 2023.

O. Ferli, “Financial Literacy for Better Access to Finance, Financial Risk Attitude, and Sustainability of MSMEs in Indonesia,” Jurnal Manajemen (Edisi Elektronik), pp. 111–122, 2023.

R. D. A. Rasjid, “THE INFLUENCE OF FINANCIAL LITERACY ON INTENTIONS TO INCREASE THE PERFORMANCE AND SUSTAINABILITY OF MSMEs DURING THE COVID-19 PANDEMIC IN BULUKUMBA,” JOURNAL OF APPLIED MANAGERIAL ACCOUNTING, vol. 6, no. 1, pp. 132–145, 2022.

N. N. Aeni and M. N. Innayah, “Factors Affecting Financial Literacy of MSMEs: A Conceptual Framework,” Proceedings Series on Social Sciences & Humanities, vol. 7, pp. 9–15, 2022.

N. A. Dela Cruz, A. C. B. Villanueva, L. A. Tolin, S. Disse, R. Lensink, and H. White, “PROTOCOL: Effects of interventions to improve access to financial services for micro‐, small‐and medium‐sized enterprises in low‐and middle‐income countries: An evidence and gap map,” Campbell Systematic Reviews, vol. 19, no. 3, p. e1341, 2023.

R. Putri, M. C. Amrulloh, J. Sutrisno, S. Saptana, and N. L. Dani, “Government Policy Strategy towards Empowering MSMEs in the Covid-19 Pandemic at the Bulak Fish Market Center, Surabaya City,” Athena: Journal of Social, Culture and Society, vol. 1, no. 3, pp. 93–101, 2023.

S. M. A. Cruzado, I. D. M. Dimaano, R. L. L. Manahan, J. C. Medes, and R. V. Villarma, “Financial constraints: Its impact on access to financing of micro, small, and medium businesses in Calapan City,” World Journal of Advanced Research and Reviews, vol. 18, no. 2, pp. 271–280, 2023.

V. A. C. Linting, “Pengaruh Pengetahuan Keuangan, Sikap Keuangan, Dan Kepribadian Terhadap Perilaku Manajemen Keuangan Pada Pelaku Umkm Kerajanan Tenun Di Toraja.” UNIVERSITAS HASANUDDIN, 2021.

N. Bhalla, R. K. Sharma, and I. Kaur, “Effect of Goods and Service Tax System on Business Performance of Micro, Small and Medium Enterprises,” SAGE Open, vol. 13, no. 2, p. 21582440231177210, 2023.

K. T. Kustina and W. S. Aji, “Cashless Society Sebagai Pemoderasi Pengaruh Fintech Payment Gateway Terhadap Kinerja Keuangan UMKM di Kota Denpasar,” Moneter-Jurnal Akuntansi dan Keuangan, vol. 10, no. 1, pp. 32–41, 2023.

M. F. P. Hartanti, C. N. Mardita, M. Tirta, A. R. A. Putra, and I. Setyaningrum, “Literasi Pemasaran Digital dan Teknologi Keuangan Sebagai Sarana Peningkatan Omset UMKM di Probolinggo,” J-MAS (Jurnal Manajemen dan Sains), vol. 8, no. 1, pp. 113–118, 2023.

V. A. C. Linting, “Pengaruh Pengetahuan Keuangan, Sikap Keuangan, Dan Kepribadian Terhadap Perilaku Manajemen Keuangan Pada Pelaku Umkm Kerajanan Tenun Di Toraja.” UNIVERSITAS HASANUDDIN, 2021.

A. T. Novitasari, “Peran Modal Usaha Terhadap Minat Berwirausaha Batik Tulis Tanjung Bumi,” Journal on Education, vol. 6, no. 1, pp. 2295–2302, 2023.

W. Fitrayanto Nugraha, H. Hardjomidjojo, and M. Sarma, “Risk Assessment of MSME Credit Process Digitalization Program of PT Bank XYZ West Sumatra Region,” International Journal of Research and Review, vol. 10, no. 6, pp. 361–371, 2023, doi: 10.52403/ijrr.20230644.

J. C. Bancoro, “Financial Literacy of MSME Business Owners in the Municipality of San Jose, Negros Oriental, Philippines: A Basis for a State University’s Extension Program,” International Journal of Asian Business and Management, vol. 2, no. 3, pp. 241–274, 2023.

H. R. P. Hartono and Y. D. Kurniawan, “Financial Literacy. A Case Study in Madiun,” Indonesian Journal of Business Analytics, vol. 3, no. 3, pp. 665–672, 2023.

T. Katauke, S. Fukuda, M. S. R. Khan, and Y. Kadoya, “Financial Literacy and Impulsivity: Evidence from Japan,” Sustainability, vol. 15, no. 9, p. 7267, 2023.

M. Björklund and J. Sandahl, “Teaching and learning financial literacy within social studies–a case study on how to realise curricular aims and ambitions,” Journal of Curriculum Studies, pp. 1–14, 2023.

E. R. Maulida, E. Munandar, and N. Nurochani, “The Effect of Financial Literacy and Paylater Payment System on Student Consumptive Behavior in Ciamis Regency in Sharia Economic Perspective,” JETISH: Journal of Education Technology Information Social Sciences and Health, vol. 2, no. 1, pp. 399–410, 2023.

Y.-C. Chen and S. Sun, “Gender Differences in the Relationship Between Financial Capability and Health in Later Life: Evidence From Hong Kong,” Innovation in Aging, vol. 7, no. 6, p. igad072, 2023.

M. S. Tahir and D. W. Richards, “Consumer financial behavior and financial capability,” A Research Agenda for Consumer Financial Behavior: 0, p. 245, 2023.

C. Anjani and D. Darto, “Financial Literacy, Income and Self-Control on Financial Management Behavior of Generation Z,” BASKARA: Journal of Business and Entrepreneurship, vol. 5, no. 2, pp. 152–164, 2023.

L. T. T. Hong, “Research on financial autonomy and financial management in public higher education,” International journal of business, economics & management, vol. 6, no. 2, pp. 112–122, 2023, doi: 10.21744/ijbem.v6n2.2126.

Z. Indra, B. Wibowo, S. I. O. Sembiring, and M. Metalia, “The effect of profitability and growth on micro small and medium enterprise (MSME) capital structure with the size of the company as a control variable,” in ICEBE 2020: Proceedings of the First International Conference of Economics, Business & Entrepreneurship, ICEBE 2020, 1st October 2020, Tangerang, Indonesia, European Alliance for Innovation, 2021, p. 98.

N. Altaf and F. A. Shah, Capital Structure Dynamics in Indian MSMEs. Springer, 2021.

A. M. Padilla Ospina, J. A. Rivera Godoy, and J. H. Ospina Holguin, “Determining factors of the capital structure of real sector MSMEs that participated in the Colombian Innova Prize competition, 2007-2011,” Revista Finanzas y Política Económica, vol. 7, no. 2, pp. 359–380, 2015.

P. H. Desai, N. Borde, and M. Nagar, “Capital structure analysis of MSMEs with reference to start-up and later stages,” International Journal of Entrepreneurship and Small Business, vol. 43, no. 4, pp. 502–516, 2021.

D. Ramadhani, A. Sukoco, and J. Suyono, “CAPITAL STRUCTURE ANALYSIS TO OPTIMIZE THE PROFITABILITY OF MSMES (CASE STUDY ON MSMES HIKMAH IN SIDOARJO, EAST JAVA, INDONESIA),” in Journal of World Conference (JWC), 2019, pp. 241–250.

D. K. N. Murthy, “an Emprical Literature Review on Finnacial Inclusion,” International Journal of Social Science & Economic Research, vol. 08, no. 03, pp. 387–406, 2023, doi: 10.46609/ijsser.2023.v08i03.003.

M. Á. Espiño, S. Fernández-López, L. Rey-Ares, and S. Castro-González, “Capacitación y comportamiento financiero de la generación millennial en España,” Revista Galega de Economía, vol. 29, no. 3, pp. 1–20, 2020.

O. García Mata, A. L. Zorrilla del Castillo, A. Briseño García, and E. Arango Herrera, “Actitud financiera, comportamiento financiero y conocimiento financiero en México,” Cuadernos de Economía, vol. 40, no. 83, pp. 431–457, 2021.

J. Fu, “Ability or opportunity to act: What shapes financial well-being?,” World Development, vol. 128, p. 104843, 2020.

V. I. Dewi, E. Febrian, N. Effendi, M. Anwar, and S. R. Nidar, “Financial literacy and its variables: The evidence from Indonesia,” Economics & Sociology, vol. 13, no. 3, pp. 133–154, 2020.

H. Sulistianingsih and F. Santi, “Does SME’s financing decisions follow pecking order pattern? The role of financial literacy, risk preference, and home bias in SME financing decisions,” Cogent Business & Management, vol. 10, no. 1, p. 2174477, 2023.

R. D. A. Parmitasari, “Sustainability and Performance of Small and Medium Business: the Role of Financial Literature,” International Journal of Professional Business Review, vol. 8, no. 5, pp. e01048–e01048, 2023.

S. D. ADDO, J. Asantey, and D. M. Awadzie, “THE IMPACT OF FINANCIAL LITERACY ON RISK PROPENSITY MEDIATED BY ACCESS TO FINANCE,” Journal of Business Economics and Finance, vol. 11, no. 4, pp. 195–205, 2022.

E. Fatmawati, “Relationship of financial literacy and financial inclusion in increasing the performance of angkringan SME in Bekasi,” Enrichment: Journal of Management, vol. 13, no. 1, pp. 270–276, 2023.

Y.-C. Chen and S. Sun, “Gender Differences in the Relationship Between Financial Capability and Health in Later Life: Evidence From Hong Kong,” Innovation in Aging, vol. 7, no. 6, p. igad072, 2023.

Y. Agustina, C. Davis, and S. B. Haryono, “Financial management behavior of Indonesian banking customer based on individual literacy level,” Journal of Eastern European and Central Asian Research (JEECAR), vol. 10, no. 2, pp. 164–178, 2023.

D. K. Respati, U. Widyastuti, T. Nuryati, A. M. Musyaffi, B. D. Handayani, and N. R. Ali, “How do students’ digital financial literacy and financial confidence influence their financial behavior and financial well-being?,” Nurture, vol. 17, no. 2, pp. 40–50, 2023.

Downloads

Published

2024-03-28

How to Cite

Hartaty, S., & Oktarida, A. (2024). MSMEs Tax Reform for Financial Sustainability: Financial Literacy, Financial Capability and Capital Structure. West Science Accounting and Finance, 2(01), 110–121. https://doi.org/10.58812/wsaf.v2i01.438

Issue

Vol. 2 No. 01 (2024): West Science Accounting and Finance

Section

Articles

License

Copyright (c) 2024 Sri Hartaty, Anggeraini Oktarida

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.