The Impact of Financial Inclusion, Financial Literacy, and CSR on MSME Financial Performance: A Study in Humbang Hasundutan Regency

Abstract

This study investigates the key factors influencing the financial performance of Micro, Small, and Medium Enterprises (MSMEs) in the Humbang Hasundutan Regency. The research addresses persistent challenges faced by MSMEs, including limited understanding of accounting practices, constrained business capital, and barriers to accessing formal financial services. This study aims to analyze the specific influence of financial inclusion, financial literacy, and Corporate Social Responsibility (CSR) on MSME financial performance. Using a quantitative approach, data was collected from 70 MSME owners selected via purposive sampling. The data was subsequently analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS software. The findings reveal that financial literacy and CSR both have a positive and significant effect on the financial performance of MSMEs. However, financial inclusion was found to have no significant effect. This suggests that while knowledge and social responsibility are key drivers of performance, mere access to financial services is insufficient on its own to improve the financial standing of MSMEs in this region.

Keywords Financial Inclusion, Financial Literacy, CSR, MSME Financial Performance, PLS-SEM.