Building Financial Literacy in SMEs: The Role of Financial Knowledge, Financial Attitude, Financial Skill, and Peer Influence

This research endeavors to investigate the determinants influencing the financial literacy of Micro, Small, and Medium Enterprise (MSME) actors in Yogyakarta, Indonesia. The study specifically examines the impact of financial knowledge, financial attitudes, financial skills, and peer influence on the financial literacy of MSME entrepreneurs. Data was collected on Yogyakarta’s Micro, Small, and Medium Enterprise (MSME) actors. The data collection technique used purposive sampling. The data collected was 259 sourced from micro-business actors through a survey using a Likert scale (1–5). The analytical tool used in this study is SEM-PLS. The findings reveal that financial knowledge, financial attitudes, and financial skills significantly contribute to enhanced financial literacy among MSME actors. However, the study indicates that peer influence does not substantially impact these entrepreneurs’ financial literacy. This observation is attributed to the predominantly independent nature of micro-business operators in the sampled population. Despite constraints related to data collection methods and participant schedules, the study offers valuable insights for policymakers, business support agencies, and educators aiming to elevate the financial literacy of MSME actors. This research only focuses on the Special Region of Yogyakarta. Future research can expand the scope of the research area so that generalization becomes more comprehensive in explaining the phenomena that occur in Micro, Small, and Medium Enterprises (MSMEs).