Linking the role of e-commerce and financial literacy on MSME's sustainability performance during the digital era

Abstract

In recent years, E-Commerce has experienced a very significant increase. E-commerce provides a broad overview of technology, processes and practices that can be carried out without using paper as a means of transactions. E-commerce can be a solution to the paper waste problem which is an environmental issue that can lead to social problems. Thus, e-commerce has a vital role in achieving business sustainability performance. E-commerce has had a big influence on the social and economic growth of today's society. Business management's ability to manage financial information is an important indicator in influencing Micro, Small and Medium Enterprises’ (MSME's) business performance. Good managements’ financial literacy equips MSMEs with knowledge and skill empowering MSMEs to make informed financial decisions, manage resources effectively and promote sustainable development. This research aims to analyze the relationship between E-Commerce and the sustainability performance of MSMEs and analyze the relationship between financial literacy and its positive and significant relationship with the sustainability performance of MSMEs. The research method uses a descriptive method with a quantitative approach. The population in this research are MSMEs managers in Indonesia who have comprehensive knowledge regarding the operations and performance of MSMEs. In this study, researchers used a simple random sampling technique with a sample size of 478 MSME managers. Data analysis in this research uses the Partial Least Square (PLS) technique which is an alternative method based on the variance of the variables used. The stages of data analysis are validity testing, reliability testing and hypothesis testing. The independent variables in this research are e-commerce and financial literacy, while the dependent variable is MSME sustainability performance. The results of this research show that e-commerce has a positive and significant relationship with MSME sustainability performance and financial literacy has a positive and significant relationship to MSME sustainability performance. In addition, e-commerce has a significant influence on the sustainability performance of MSMEs because the presence of e-commerce is one of the marketing alternatives used to reach more vendors and customers which can change the supply chain leads to social problem solution such as food distribution. Further, e-commerce may minimize traveling long distances for shopping resulting to the carbon footprint reduction. MSMEs have the same opportunity to use e-commerce as an alternative to maximize performance. However, not all MSMEs have the capability to use and utilize e-commerce optimally. After all, knowing good financial management will make it easier to make sustainable decisions since the higher the level of financial literacy, the MSME players can optimize their sustainability performance.