Financial Capability, Financial Technology, and MSME Performance: The Moderating Role of Financial Knowledge

Abstract

Purpose: This research intends to investigate the effect of financial capability and financial technology on the financial performance of Micro, Small, and Medium Enterprises (MSMEs). In addition, the study evaluates the moderating role of financial knowledge in strengthening the relationship between financial capability, financial technology, and MSME performance. The research also explores how financial literacy supports MSMEs in managing financial resources and adopting digital financial services efficiently.

Method: This study applies a quantitative research design using a survey approach. Primary data were gathered through structured questionnaires distributed to 210 MSME owners and managers in Indonesia. The respondents were selected using stratified random sampling to ensure representation from various business sectors. The collected data were analyzed using Structural Equation Modeling (SEM) with the Partial Least Squares (PLS) method through SmartPLS software.

Finding: The results demonstrate that financial capability and financial technology positively and significantly influence MSME financial performance. Moreover, financial knowledge strengthens the positive relationship between financial capability and business performance, as well as between financial technology and MSME performance. MSMEs possessing stronger financial knowledge are better able to make strategic financial decisions and optimize the use of fintech services, which ultimately improves business outcomes.

Novelty: The uniqueness of this study lies in the integration of financial capability, financial technology, and financial knowledge within a single conceptual framework related to MSME financial performance. Furthermore, this study emphasizes the role of financial knowledge as a moderating variable, which has received limited attention in previous fintech and MSME performance studies, particularly in Indonesia.