From Literacy to Loans: Unlocking Msmes Financing Through Quality of Financial Reporting

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Sumatera Selatan— High-Quality Financial Reports Are Key to Making It Easier for MSMEs to Obtain Loans. Research conducted by Yesita Astarina, Dwi Riana, Ulfah Muharramah, Geovanny Mahardika, Sakhi Chelsea Khoirunnisa, and Cinta Cahaya Putri from Sriwijaya State Polytechnic, together with Nur Riana Binti Abdul Rahim from Mukah Sarawak Polytechnic, published in the International Journal of Business and Applied Economics (IJBAE) Vol. 5, No. 1 January 2026.

The study was conducted in 2025 on MSMEs under the guidance of Rumah BUMN South Sumatra and published in 2026. The results are important because access to capital remains a major obstacle to the growth of Indonesian MSMEs.

MSMEs are the backbone of the national economy, but many small business owners find it difficult to access formal financing. Banks and financial institutions require clear financial reports, while most MSMEs are not accustomed to systematic record-keeping. This is where financial literacy and the quality of financial reports come into play as determining factors. This study shows that these two factors are not merely administrative requirements, but rather determinants of the trustworthiness of financing institutions.

How the study was conducted

The researchers surveyed 50 MSMEs that had applied for financing from formal institutions such as banks, cooperatives, or leasing companies within the previous two years. Respondents were business owners or managers directly responsible for financial management, and each business had operated for at least two years. Data were collected through questionnaires and analyzed using statistical modeling to examine cause-and-effect relationships among variables. The analysis focused on three main aspects: financial literacy, quality of financial reporting, and ease of access to financing.

In practical terms, the team examined:

whether financial literacy improves MSMEs’ ability to obtain financing,
whether financial literacy enhances the quality of financial reports, and
whether better financial reports make it easier to secure loans.

Key findings

The results reveal a consistent and significant pattern:

Financial literacy directly improves access to financing. MSME owners who better understand financial concepts and management practices are more likely to obtain funding.
Financial literacy strongly enhances financial reporting quality. Business owners with stronger financial knowledge produce reports that are clearer, more relevant, and more reliable.
High-quality financial reports increase the ease of accessing financing. Transparent and structured reports reduce lenders’ uncertainty about business conditions.
Financial reporting quality acts as a bridge. Financial literacy influences financing access not only directly, but also indirectly through improvements in reporting quality. Knowledge is translated into credible financial documents, and those documents open doors to funding.

The research model shows that more than half of the variation in financing access can be explained by financial literacy and reporting quality—an unusually strong result in MSME studies. This indicates that internal managerial capability plays a major role in external funding success.

Why financial reports matter to lenders

For banks and financial institutions, financial statements are the primary tool for assessing risk. They reveal cash flow, profitability, expenses, and business stability. Without reliable reports, lenders face high information uncertainty. The study confirms that high-quality financial reporting reduces information asymmetry between MSMEs and financiers, increasing institutional trust.

Yesita Astarina and her colleagues show that financial literacy fosters habits such as recording transactions consistently, understanding cost and revenue structures, and preparing reports that can be compared over time. These practices make MSMEs appear more professional and lower-risk in the eyes of lenders.

Implications for businesses and policymakers

The findings send a clear message: financial literacy programs should move beyond theory. Training initiatives need to include hands-on guidance in preparing simple but standardized financial statements. For mentoring institutions such as Rumah BUMN, practical modules—especially those supported by digital bookkeeping tools—can significantly improve MSMEs’ financing success rates.

For financial institutions, the study supports integrated approaches that combine lending with education. Recognizing financial literacy training and good bookkeeping practices as positive indicators in credit assessments could help expand financial inclusion.

At the policy level, the research demonstrates that improving financial literacy is not merely an educational issue but an economic strategy. When MSMEs gain easier access to capital, their production capacity, competitiveness, and job creation potential grow accordingly. Strengthening financial capabilities at the grassroots level can therefore contribute to broader economic resilience.

Author Profiles

Yesita Astarina –Politeknik Negeri Sriwijaya
Dwi Riana –Politeknik Negeri Sriwijaya
Ulfah Muharramah –Politeknik Negeri Sriwijaya
Geovanny Mahardika –Politeknik Negeri Sriwijaya
Sakhi Chelsea Khoirunnisa –Politeknik Negeri Sriwijaya
Cinta Cahaya Putri –Politeknik Negeri Sriwijaya
Nur Riana Binti Abdul Rahim –Politeknik Mukah Sarawak

Research Source

Astarina, Y., Riana, D., Muharramah, U., Rahim, N.R.B.A., Mahardika, G., Khoirunnisa, S.C., & Putri, C.C. (2026). From Literacy to Loans: Unlocking MSMEs Financing Through Quality of Financial Reporting.

International Journal of Business and Applied Economics (IJBAE) Vol. 5, No. 1 January 2026: 437-450

DOI: https://doi.org/10.55927/ijbae.v5i1.593

URL Resmi: https://nblformosapublisher.org/index.php/ijbae