The Role of Capital Access and Business Scale in Enhancing MSME Performance in Indonesia

Abstract

This study aims to investigate the effect of financial literacy, business strategy, and access to capital on the performance of MSMEs in Indonesia. This study also discusses the role of business scale as a moderator to facilitate the connection between access to capital and business performance. This study applies a quantitative approach with non-probability cluster sampling, collecting data from 271 MSME respondents in Indonesia. Analysis was conducted using the Partial Least Squares Structural Equation Modeling (PLS-SEM). Based on the findings, capital accessibility has a positive influence on MSME performance and this is strengthened by increased business size. There are no statistically significant effects from business strategy and financial literacy. This points to the fact that financial and strategic skills are valuable, but their influence might depend on other organizational capacities like size, infrastructure, or maturity of implementation. These results show the contribution of finance and operational capacity in MSME performance, but suggest that managerial skills and strategic ones can be enhanced in order to build performance improvement.