The Influence of Financial Inclusion on MSMEs' Performance Through Financial Intermediation and Access to Capital

This study aims to analyze the influence of financial inclusion on micro-, small-, and medium-sized enterprises' (MSMEs) performance and examine the mediation role of financial intermediation and access to capital. The object of this study is MSMEs in Malang, Indonesia. The sample consists of 100 MSME actors in Malang City, which is determined using Roscoes theory. The data is collected using Simple Random Sampling method, by distributing questionnaire measured with Likert scales. The hypotheses proposed in this study are examined using Partial Least Square (PLS) model. The results of this study show that financial inclusion influences MSMEs' performance both directly and indirectly through mediation from financial intermediation and access to capital. The direct influence means that the efforts to increase access to financial services, especially access to credit financing for MSMEs, will be able to increase market share, number of workers, sales, as well as profit of the MSMEs. Increased financial inclusion has a major impact on improving MSMEs' performance through financial intermediation compared to access to capital. This means that the increase of financial access for MSMEs followed by an increase in financial intennediation in the form of a financial service approach to MSMEs will improve MSMEs' perfonnance.