The mediation role of financial literation in ensuring MSMEs sustainability: An organizational characteristics perspective

The Micro, Small, and Medium Enterprise (MSMEs) sector has been recognized as an essential contributor to the economic development of Indonesia. However, the sustainability of MSMEs in Indonesia is still relatively low compared to the rest of ASEAN countries with similar levels of economic growth. This study aims to extend previous studies on the relationship between MSMEs characteristics and their sustainability by specifically including financial literation as a mediation role. This study used proportional random sampling as a sampling technique. A total of 191 MSMEs owner-managers questionnaire data were processed by using Partial Least Square analysis. This study confirmed the positive influence of MSMEs characteristics on financial literacy and financial literacy on the sustainability of MSMEs. Moreover, financial literation proves to be a significant mediator of MSMEs sustainability. This study suggests that MSMEs owner-managers need to be financially literate as it can enable them to make a good financial decision that can ensure their business sustainability.


Introduction
The role of MSMEs in the economic growth of a country is widely known and utilized to improve the national economy in many countries including Indonesia.Currently, the data shows that SMEs in Indonesia grows significantly up to 97.2% and contribute to GDP for 57.8% (Wignaraja, 2015), while Small Business contributes up to 45% of total employment and 33% of national income in developing countries (Kumar, 2017).The contribution of SMEs is also supported by the growth of production in small and micro industries from 2017 to 2019 with an annual percentage of 4.74%, 5.66%, and 5.80% (Kumar, 2017).However, the competitiveness of SMEs in Indonesia is relatively low compared to other ASEAN countries such as Singapore, Malaysia, and Thailand.Bongomin et al. (2017) added that the lack of access to formal and non-formal financial services is one of the biggest obstacles for SMEs to be competitive and grow.Along with that, other issues such as human resource capacity and capability, ownership, marketing, technology adoption, and other problems related to business management also become the reason why ,QGRQHVLD ¶V SMEs are difficult to compete (Abor & Quartey, 2010) and maintain their business sustainability in the future.
As many MSMEs are a force to reconfigure their business process to remain to sustain in a complex and competitive world, the terms of sustainability have become a common topic to discuss in measuring business performances.Although, it has been a controversial topic since it has multiple interpretations, Salimath & Jones (2011) generalized the measurement and interpretation of this concept that is dependent on the aims and interests of the researchers.Yusoff et al. (2019) argued that the sustainability of the business is accomplished when an organization can enable the balance of economic and social aspects while keeping environmental sustainability.Fitria & Rahman (2018) added that ³Whe sustainability of MSMEs is also seen by the ability of its return on investment, complaints from consumers, income sustainability and the increasing number of customers.It shows how a business can survive and continue to develop during the ongoing business competition ´ 7KHUHIRUH the ability to manage finances and expand financial access is highly demanded to achieve the desired goal of MSMEs sustainability.
Financial literacy has been identified as an important source of knowledge for financial decision making (Ye & Kulathunga, 2019) which can guide business stakeholders to make financial decisions and use financial product options (Bongomin et al., 2017).Financial literacy can also ensure the financial sustainability of individuals, families, companies, and the national economy (Swiecka et al., 2020).Meanwhile, Lusardi & Tufano (2015) stated that financial literacy helps business stakeholders gain adequate financial knowledge, skills, and capabilities in preparing a business financial strategy.As a consequence, business stakeholders should be more effective and efficient in planning, implementing, and supervising the implementation of their business finances.Several previous studies by Widayanti et al. (2017), Hapsoro & Iswara (2019), Ye & Kulathunga (2019) shows that the role of financial literacy also influences business sustainability.Furthermore, the crucial role of the organization as a business driver should also be considered especially in terms of its capability to manage the business and implement its knowledge and skills properly.
Successful organizations realize that their attention must be directed to the knowledge management process in which consists of the creation, conversion, dissemination, and contribution of knowledge, as well as the methods of storing, selecting, processing, using, and assessing knowledge to excel their performance (Abualoush et al., 2018).Concerning originality, this study is immensely scattered compared to other studies because it examines the indirect relationship of organizational characteristics to MSMEs sustainability where financial literacy is used as a mediating variable.Furthermore, it uses the object of the leading MSMEs sector which consists of 5 types of business sectors.It also uses objects across the MSME sector so that this study expands the generalization of the previous study's findings.

Sustainability in The MSMEs Sector
Sustainability is a controversial issue because it means different things to a different study.There is no standard definition of sustainability, especially in the corporate context.Therefore, the measurement and interpretation of these constructs depend on the aims and interests of the researchers.Salimath & Jones (2011) said that "there is no consensus on a unified definition of sustainability.Furthermore, the measurement and interpretation of this construct appear to be idiosyncratic to specific aims or research interest."In a simple word, sustainability is no more than a static word, the ability to continue unchanged.The concept of sustainability is also often linked with the sustainable development framework.Aras & Crowther (2008)  The literature on sustainability emphasizes the need for systematic thinking to conserve natural resources, eliminate poverty, promote equality, reduce population growth and improve quality of life (Velazquez et al., 2011).Aras & Crowther (2008) categorized four dimensions of sustainability that are needed to be recognized and analyzed, namely social influence (which is defined as a measure of the impact of the community on the company in terms of social contracts and stakeholder influence), environmental impact (which is defined as a measure of the impact of company actions on the geophysical environment), organizational culture (the interaction and relationship between the company and its internal stakeholders), and financial (which is measures an adequate return on the level of risk taken).
On the other hand, Yusoff et al. (2019) and Asif et al. (2011) stated that sustainability also can be interpreted as adopting a business strategy and activities that meet the needs of the company and stakeholders while protecting, maintaining, and enhancing human and natural resources needed in the future.However, the quantitative measurement of corporate sustainability remains debatable.The objectives of measuring sustainability also vary depending on researchers' interests.One of the most frequently used approaches in measuring corporate sustainability is the triple bottom line approach.Faupel & Schwach (2011) stated that "the objective of a sustainability measurement is assessing the contribution of an entity (eg, company) to sustainability comprising all three dimensions: environmental, social, and economic."While environment sustainability measurement focus in measures the impact of business process on natural resources (such as air, water, and waste emissions), social and economic sustainability measurement focus in measures the implementation of corporate governance, motivation, incentives, safety, health, human resource development, human rights, ethical behavior, and the maintenance or improvement of a company's success such as technology, innovation, knowledge management, purchasing, and sustainability.
Several previous studies from Eniola & Entebang (2017), Klewitz (2017), Ye & Kulathunga (2019) indicate that the term of firm sustainability has a similar meaning with SMEs sustainability in general.Ye & Kulathunga (2019) explained the eight metrics of SMEs sustainability that consist of a reduction in operating costs, an increase in the rate of profit growth and market share, customer satisfaction, speed of customer order confirmation, speed of response to market demand, reduction of product or service delivery cycle times, profit as a percentage of sales and returns on investment (ROI).In addition, Schwab et al. (2019), Amusawi et al. (2019) evaluate business sustainability by using a financial approach such as the comparison between income earned and operating expense, credit limit level, and the liquidity level of the company.The financial attitude and behavior of MSMEs ownermanager play a critical role to ensure their business sustainability.Rai et al. (2019) strengthened that financial attitude and behavior have a strong association with financial literacy, especially in working women.Unfortunately, studies from Dai et al. (2021) and Kostini & Raharja (2020) related to this topic find the opposites.Many of Indonesia's MSMEs owner-manager has not proper financial planning for the future due to their lack of financial literacy.Many of them do not have a standardized financial statement and prefer to use individual funding as their main business capital.

Organizational Characteristics
Organizational characteristics are characteristics of the management model adopted by (2017) stated that culture, climate, leadership, power, participation, and communication are other characteristics that can differ in any type of organization.For example, most MSMEs have a flat hierarchy with centralized authority (which is the business owner who is also the manager), fast results-oriented, flexible, unified, and fluid culture due to their simple organizational structure (Siegel et al., 2019).
Concerning organizational resources, the knowledge possessed by individuals who are part of the organization becoming crucial as it cannot be shared efficiently without having adequate competence, relevant to realizing the competencies needed to share knowledge (Gaál et al., 2013).Furthermore, Adomako et al. (2016) classified "financial literacy as a part The mediation role of financial literation in ensuring MSMEs sustainability: An organizational characteristics perspective by Arik Prasetya, Kusdi Rahardjo, Mukhammad Kholid Mawardi, Raden Rustam Hidayat, Yudha Prakasa of internal firm capability that can complement access to finance to achieve superior growth outcomes."Organizations that are rapidly using new technologies to create collaborative work and knowledge-sharing culture can uplift their organizational performance in an efficient way (Kulathunga et al., 2020).Besides, Brown et al. (2017) added that cultural differences prove to be significant financial literacy predictors between students with different languages and socio-economic backgrounds.Therefore, the proposed hypotheses can be described as follows.
H 1 : There is a positive relationship between MSMEs characteristics and financial literacy.

Financial Literacy
Financial literacy has become a critical determinant in organizational decision-making and strategic objectives for long-term financial planning (Allgood & Walstad, 2013;Lusardi & Mitchell, 2014).Financial literacy can be interpreted as the ability of an individual to maximize their potential knowledge and skills to make appropriate financial decisions.It includes the ability to discern financial choices (savings, investments, debt, insurance, asset accumulation, loans, and pension) and to use basic financial knowledge combining with comprehensive skill sets, communication, and networks to achieve desirable objectives (Margaretha & Pambudhi, 2015;Lusardi & Mitchell, 2014).Stadler et al. (2013) found that financially literate managers could produce better financial strategic (investment) decisions and know how to respond to any dynamic case competently and rapidly.Moreover, Eniola & Entebang (2017) added that there is a positive influence of MSMEs owner-manager financial knowledge, financial awareness, and financial attitudes in changing financial literacy on the improvement of company performance.
Several previous studies from Ambarwati & Zuraida (2020), Ye & Kulathunga (2019), Hapsoro & Iswara (2019) found that there were positive associations of financial literacy to MSMEs sustainability.The more financially literate MSMEs owners and managers, the higher the possibility of sustainability MSMEs will be.Furthermore, a study from Makhloufi et al. (2018) also found that to creating a knowledge-sharing culture, MSMEs sustainability can also be influenced by organizational characteristics.The implementation of a knowledgesharing culture will encourage companies to be more competitive and have good business continuity.Besides, financial literacy is the perception of how to obtain financial knowledge and apply financial knowledge that is owned in running a business.Companies acquire and apply knowledge influenced by the organizational structure that supports the search and creation of knowledge (Robbins, 2003).Furthermore, organizational culture characteristics also play a role in creating a knowledge exchange climate (Cameron et al., 2014).Knowledge sharing culture will encourage companies to be competitive and have good business continuity.For SMEs, knowledge about financial literacy is proven to improve business sustainability (Ye & Kulathunga, 2019).While the antecedent factor of increasing organizational knowledge, including financial literacy, is the organizational characteristics of SMEs regarding structure, culture, and technology (Robbins, 2003;Cameron et al., 2014;Hatch, 1993).The mediation role of financial literacy on the sustainability of MSME businesses is proven to be influential as illustrated by the research of Bongomin et al. (2017).
Although it does not explicitly describe business sustainability, it refers to business growth which is also a measure of the sustainability of MSME businesses Yanti et al. (2018).This is relevant to Robbin's (2003) argument that stated organizational knowledge including financial literacy, can improve organizational performance and sustainability if it is strengthened by good organizational characteristics.
H 2 : There is a positive relationship between financial literacy and MSMEs sustainability.
H 3 : There is a positive relationship between MSMEs characteristics and MSMEs sustainability with financial literacy play a mediator role.

Methods
This study can be classified as exploratory research with a quantitative approach.The data used is primary data which is collected directly through the distribution of a survey questionnaire with five-point of Likert as a measurement scale.The questionnaire contains the perceptions of MSMEs owners-managers on organizational characteristics, financial literacy, and business sustainability.In this study, organizational characteristics measurements were adapted from that has Robbins (2003)    The sampling method applied in this study is the sector-based proportional random sampling technique.Proportional random sampling is one of the sampling technique that used "when members or elements that are not homogeneous and stratified proportionately".The five leading sectors use in this study are food and beverage, fashion, application, animated design, and craft in Malang, Indonesia.Malang was chosen as the object of study due to the reason that this city was established as one of the 10 creative cities in Indonesia and the fact of huge economic contribution of MSMEs (Khouroh et al., 2020).Moreover, the criterion of MSMEs used as the initial selection of respondents is MSMEs that have employees of 99 with the maximum total asset of IDR 10 Billion.A total sample of 191 MSMEs ownersmanagers was obtained and used to examine the associations between organizational characteristics, financial literacy, and business sustainability by using Partial Least Square (PLS).PLS is a variant based on structural equation analysis that can evaluate both measurement and structural models at the same time (Mardijuwono & Subianto, 2018).PLS analysis has two main results which are the inner and outer model.While the inner model refers to the connection of the latent variables in a structural model or path matrix format Ajibola et al. (2018), the outer model is represented by the value of construct validity and reliability.Hair Jr et al. (2016) added that models can be classified as valid and reliable when the value of an outer factor is 0.500, the value of composite reliability and AVE value of each construct that is greater than 0.700 and 0.500, the result of Cronbachs' alpha test that exceeds 0.700, and the result of discriminant validity of each construct that is greater than the correlation value of the construct with the other constructs within a model.The results of the validity and reliability testing can be seen in Tables 2 and 3.

Result and Discussion
The description of the majority of respondents in Table 4 shows that 61% of the respondents are male with junior high school backgrounds.Above 50% of respondents in this study are classified as experienced businessmen/women with the majority of them choose culinary as their business focus.Unfortunately, there are 55% of respondents have not been registered and have not a legal entity.This nature of condition limited their access to government facilities related to increasing financial literacy and inclusion.
Table 5 shows that all the proposed hypotheses in this study are supported as the p-value of each proposed hypothesis was lower than 0.050 (0.000, 0.000, 0.001).This study confirmed the positive influence of MSMEs characteristics on financial literacy and financial literacy on the sustainability of MSMEs.It means that the bigger technology investment and the more flexible the structure of MSMEs in accommodating knowledge-sharing culture, the higher the financial literacy will be.This study supports the conclusion of previous studies by Zaridis & Mousiolis (2014) and Eniola & Entebang (2017).The result of this study also supports Drexler et al. (2014), Widayanti et al. (2017), andSwiecka et al. (2020) conclusion that stated that the more financially literate of MSMEs owner-managers, the higher the probability of MSMEs to sustain.Although it does not directly affect the sustainability of MSME businesses, both financial literacy and the sustainability of SMEs are two things that need to go hand in hand to improve MSMEs' performance.Several cases were found by Bhushan (2013) and Krishna et al. (2010) related to the MSMEs owner-manager who are having lack basic financial knowledge, they will experience difficulties in financial management, use of credit, and financial plans so that it will affect their business continuity, financial consumption practices, and business flexibility.The leading sectors of MSMEs in Malang, Indonesia have realized that their financial knowledge has assisted them to implement financial management practices to maintain efficiency, help their business to be flexible in their production capacity.This action reflects that MSMEs owner-manager has sufficient financial literacy to access financial services to maintain the sustainability of their businesses.
Moreover, financial literation proves to be a significant mediator of MSMEs sustainability in this study.This result is supporting the study conducted by Makhloufi et al. (2018) which states that the infrastructure owned by MSMEs to improve sustainability is reflected in the presence of supporting technology.The ownership of an adequate technology will benefit the organization in enhancing transaction speed, close communication, effective information, and ease of updating transactions and business re-engineering.The technological context in this study is one of the characteristics of the leading sector of MSMEs in Malang in conducting production, marketing, and distribution activities.This study also strengthens the suggestion that MSMEs owner-managers need to be financially literate as it can enable them to make good financial decisions and access external financial support that can ensure their business sustainability especially in light of the recent dynamic situations.

Conclusion and Suggestion
The result of this study reveals that there are positive associations of MSMEs characteristics on financial literacy and financial literacy on the sustainability of MSMEs.
Financial literation proves to be a significant mediator of MSMEs sustainability in this study.
These results reflect that improving MSMEs sustainability and financial literacy requires sufficient organizational characteristics and infrastructure.Once they get financially literate, it could enable them to produces better financial strategic (investment) decisions and know how to respond to any dynamic case in competent and rapid manner.Thus, it will affect their business performances and sustainability.Several limitations in this study are this study is a short-time explanatory study, therefore, the results of this study do not describe an object in the long term.Future researchers should conduct in a longer period to deepen this study results.The object of this study that only focuses on MSMEs that are established in Malang, Indonesia is cannot be generalized to other cities in Indonesia.Future studies should choose a wider location to expand the generalization of the results.Finally, the result of this study that proved the significant mediation role of financial literacy needed to expand into the various context of the study.
the organization through its structure or strategy(MagnieraeWatanabe & Senoo, 2008).Gold et al. (2001) stated that there are three main infrastructures capabilities in the organization that can maximize their social impact which consists of technology, structural, and cultural.While technology infrastructure capabilities represent the technology-related sources that can enhance the organization's operational capability and strength the level of competitiveness of the organization(Liu et al., 2016;Irfan et al., 2019), structural and cultural infrastructure capabilities are defined byGold et al. (2001),Adobor et al. (2019),Mesfin et al. (2020), andBaskaran (2018) as an organizational hierarchy that used as the formal allocation of activities and resources among people´ DQG D VHW RI YDOXHV EHOLHI QRUPV DQG WUXVW PHFKDQLVP WKDW distinguishes one organization from another.Structural and cultural infrastructures are identified as important elements in determining successful knowledge management initiatives(Urinov, 2020;Santoro & Gopalakrishnan, 2000;Intezari et al., 2017).Moreover, Allen et al.

Table 4 .
Demographic Profile