The Effect of Financial Literacy and Financial Technology on MSME Profits

Abstract

At the beginning of 2020, the world was hit by a disaster of the Covid-19 pandemic. It has changed human life including business activities, MSMEs are no exception. Many business owners are closing their businesses due to the situation. MSME owners, therefore, need to acknowledge what can be done to generate profits and maintain their businesses. In this modern era, financial literacy and financial technology are important factors that can help MSME owners to achieve the expected profits and provide services to consumers to make buying and selling transactions more easily and quickly. However, until now, there are still many MSME owners who do not have an understanding of financial literacy and have not implemented fintech in their business. Therefore, the authors intend to examine the extent of financial literacy and financial technology influencing MSME profits in the city of Bandung. It is motivated by the large population of MSMEs and the low continuity of MSME business in this city. Many MSME owners are at the beginning of starting their business but not long after that, they close their business. This study used a quantitative descriptive method and the sample populations were 100 MSME owners in the city of Bandung. The data were collected through the distribution of online questionnaires and analyzed using the multiple linear regression method. The results prove that financial literacy significantly has a positive impact on MSME profits. Fintech gives the same result and also contributes to a simultaneous effect on MSME profits.