Financial Management Studies Vol

2 (1) 2022: 57-66

FMS

Financial Management Studies

Financial
Management
Studies

http://jkmk.ppj.unp.ac.id/index.php/fms
ISSN: 2798-4516; e-ISSN: 2798-4524

The effect of financial literacy and education level on the profitability of micro
and small enterprises in Indonesia

Hanifil Fiqri1, Ramel Yanuarta RE2*

1,2Universitas Negeri Padang

ARTICLE INFO ABSTRACT

Received 25 January 2022
Approved 15 March 2022 This study aims to analyze the effect of financial literacy as measured by
Published 08 April 2022
ownership of savings accounts and knowledge of the official financial institutions
providing loans, and the level of education on the profits of Micro and Small
Keywords:
Enterprises in Indonesia. By considering the characteristics of heterogeneous data
Financial performance,
and outliers, this study uses a quantile regression method with a confidence level
financial literacy, saving, debt,
years of schooling, micro and
(∝ = 0.05). The data used is secondary data from IFLS (Indonesia Family Life
small enterprises, quantile Survey) waves 4 and 5. 8,118 MSEs meet the criteria as samples. The analysis
regression. results show that the savings ownership of MSE owners has a significant positive
effect on the MSE profit quantile on all business scales compared to MSE owners
who do not have a savings account. Still, the effect is lower in the large quantile
group. Furthermore, knowledge of lenders' official financial institutions has a
significant positive impact on MSE profit quantiles across all business scales
compared to MSE owners who do not know lenders’ official financial institutions;
the effect is lower in the larger MSE income quintile group. Meanwhile, the
education level of MSE actors has a significant positive impact, but only on the
medium to high-scale MSE; the effect is higher for the large MSE profit quintile
group.

How to cite: Fiqri, H., & Yanuarta RE, R. (2022). The effect of financial literacy and education level on the profitability of micro and small enterprises
in Indonesia. Jurnal Kajian Manajemen Keuangan, 2 (1), 57-66. DOI: https://doi.org/10.24036/jkmk.v2i1.88
This is an open access article distributed under the Creative Commons 4.0 Attribution License, which permits unrestricted use, distribution, and
reproduction in any medium, provided the original work is properly cited. ©2021 by author.

* Corresponding author: ramel.yanuarta@fe.unp.ac.id

INTRODUCTION

Micro, Small, and Medium Enterprises Micro, Small, and Medium Enterprises (MSME) play a
significant role in Indonesia’s economy. MSMEs account for the largest Gross Domestic Product (GDP),
which is ±60% of the total GDP in Indonesia (LPPI & Bank Indonesia, 2015). However, MSMEs do not
always run smoothly; there are still many obstacles that are often faced by MSME owners, both internal
and external. Especially for Micro and Small Enterprises (MSE). Not a few MSEs struggle to survive
because they cannot deal with business problems. These problems usually stem from human resource
capacity, ownership, financing, marketing, and various other problems related to business
management. Hence, MSE is difficult to compete with larger companies (Abor & Quartey, 2010).
However, low performance is the main cause of business failure from various problems. Low
MSE performance is not only associated with poor productivity. The low performance of MSE is
generally caused by internal problems that are often faced by MSE, namely the low quality of human
capital, weak entrepreneurial abilities of MSE owners, and MSE's limitations on capital, information,
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technology, and markets as well as other production factors (Nainggolan, 2016). Of these factors,
human capital is fascinating to study. Because the performance of micro and small companies largely
depends on the human capital owned by the owner (McPherson, 1996).
MSE cannot be separated from household characteristics because MSE is an alternative
resource for households to earn income (Yanuarta RE and Krismanola., 2021). This is because MSE is
not always oriented towards entrepreneurship but also an activity to fulfill the necessities of life. Due
to poverty, households are forced to carry out income-generating activities to survive (Lateh et al.,
2017). When MSE departs from the compulsion to meet family needs, it creates high heterogeneity,
contributing to MSE's profits. The characteristics of micro-enterprises are very heterogeneous, both in
terms of the type of business, business sector, the human capital of micro-entrepreneurs, and so on.
This is in line with Verrest's (2013) statement that the characteristics of household heterogeneity and
MSE cannot be separated because MSE actors with different characteristics pursue a set of different
goals.
Furthermore, in addition to the heterogeneity problem, MSE also faces issues in data
availability, namely the difficulty of assessing MSE performance with inadequate data (Yanuarta RE
and Krismanola., 2021). For this reason, this study uses IFLS data with the Quantile Regression method.
IFLS is a longitudinal survey of Indonesian households and the most comprehensive survey ever
conducted in Indonesia surveyed by RAND. Quantile regression is an analytical method with the least
absolute deviation approach. Quantile regression analysis groups and sequences analyze in quantiles
along the distribution line of the dependent variable. This model can improve the inefficiency of the
estimation model with linear regression on big data that has an abnormal error distribution and the
presence of data outliers (Koenker, 2015; Koenker & Hallock, 2000). This model can also provide
additional information not available in linear regression because the regression coefficients are different
for each quantile.
In Mcpherson's (1996) research, the performance of micro and small businesses largely depends on the
human capital owned by their owners. Human capital can be considered MSE's primary asset to ensure
business continuity and growth. Human capital consists of 5 components: emotional, social, fortitude,
morale, and health (Ancok 2002), and can be measured through education (Todaro, 2000). In addition,
one form of human capital is financial literacy (Huston, 2010). A study conducted by Radiper and
Dhliwayo (2014) stated that several factors that affect MSE performance are the level of education.
However, in another study, Brillianti and Kautsar (2020) said that MSE performance could also be
influenced by the level of financial literacy of MSE owners. Because there are many components of
human capital, this study will limit financial literacy as measured by ownership of savings accounts
and knowledge of official financial institutions providing loans and education level.

LITERATURE REVIEW

Human Capital
Human Capital theory was first brought up by economist Adam Smith and refined by other experts
and experts. Human capital consists of two words, namely human and capital. Capital is an essential
factor in production used to make a good or service without consuming it during the production
process. Based on this definition, human capital is a form of capital like other capitals, such as money,
buildings, machines, technology, etc. (Schultz, 1961). Human capital is knowledge and skills obtained
through various educational activities such as schools, courses, and training which is something that is
obtained through the accumulation of a particular process (Alan et al., 2008). One form of human capital
is financial literacy (Huston, 2010). Human capital is a fundamental source of economic productivity
(Romer, 1999). Human capital is also an investment made by humans to increase productivity (Rosen,
1999).

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Financial literacy and Profits of Micro and Small Enterprises

Financial literacy is knowledge of basic financial concepts and the ability to perform simple calculations
(Lusardi & Mitchell, 2014). Financial literacy is a person's capacity to understand and analyze financial
data to make financial decisions (Marriot & Mellett, 1996). Financial literacy is a term used to express a
person's ability to manage money effectively and efficiently in the financial decision-making process
(Marcolin & Abraham, 2006). Financial literacy analyzed in this study focuses only on knowledge of
financial institutions providing loans and ownership of savings accounts from households (Brilliant &
Kautsar, 2020). According to Widyaningsih (2005), saving money from a second party can only be
withdrawn according to certain agreed conditions. According to Herkenhoff, Phillips, & Cohen-cole
(2016), entrepreneur consumer credit is essential at all stages of business development.
Based on the above study, a hypothesis regarding the financial literacy of MSE owners is
formulated as follows:
Hypothesis 1: Ownership of a business owner's savings account affects Micro and Small Business
Profits.
Hypothesis 2: Knowledge of the official financial institutions providing business owner loans affects
the Profits of Micro and Small Businesses.
Education Level and Profits of Micro and Small Enterprises
Education is a learning process for each individual to achieve higher knowledge and understanding of
specific objects. The knowledge obtained formally results in each individual having a mindset,
behavior, and morals through education. According to Cole et al. (2008), the level of education in the
community affects the level of understanding; the higher the level of understanding, the higher the
level of knowledge of finance. The education variable as human capital is one of the variables expected
to affect a person's welfare. The variable of education affects the productivity and efficiency of a
person's work, affecting the real income of individuals or households (Rahmatia, 2004). Based on the
above study, the following hypotheses were formulated regarding the risk preferences of MSE actors:
Hypothesis 3: The level of education of business owners affects the Profits of Micro and Small
Enterprises.

METHOD

This research is causative research with the characteristics of the problem in the form of a cause and
effect relationship between two or more variables (Indriantoro & Supomo, 2018). This study explains
how much influence financial literacy and level of education have on the profits of Micro and Small
Enterprises in Indonesia. In this study, the research object is the profit of Micro and Small Enterprises
in Indonesia as seen from business profits with data from the Indonesian Family Life Survey (IFLS).
IFLS is a longitudinal survey of Indonesian households and the most comprehensive survey ever
conducted in Indonesia surveyed by RAND. This survey is a panel survey of households, individuals,
and public facilities, which has been conducted in 5 waves since 1993.
The population in this study were all micro and small-scale non-agricultural businesses in
Indonesia that were respondents in the IFLS survey waves 4 and 5. In this study, the sampling method
used was the purposive sampling technique, where the determination of the sample with specific
considerations aimed at making the data collected later will be more representative (Sugiyono, 2010).
From the data surveyed in IFLS waves 4 and 5 (in 2007 & 2014), it was found that 8,118 samples met
the criteria to be used in the study.
Data analysis
Considering the difference in the effect of the independent variables on MSE's profit, depending on the
position of MSE in its operational scale, the quantitative regression technique was used. With this
method, the difference in this effect can be seen both in sign, magnitude, and statistical significance.
With multiple linear regression, the estimated regression coefficient only represents the average effect

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but does not represent the reality if wide variation exists in the MSE profit scale. This technique is
difficult to see in detail about the distribution of MSE returns, whether they are piled up or evenly
distributed in specific groups or layers.
Quantile regression technique was used to explain the various effects of financial literacy and
education on MSE gains in different quantile groups. The quantile regression method is a regression
method that divides or separates the data into specific quantiles by minimizing the unsymmetrical
weighted absolute MSEan and estimating the conditional quantile function in an overall data
distribution. The MSE gain variable as the dependent variable was formed in the quantiles of the
conditional distribution and estimated as a function of the covariates of the independent variables, both
the study variable and the control variable (Koenker & Hallock, 2001), and estimated outcomes for
several quantiles simultaneously.
The quantile regression method has the same function as the classical linear regression method.
The difference is that the quantile regression method uses the Least Absolute Deviation (LAD)
mechanism in estimating the equation for each conditional quantile function. Therefore, quantile
regression can provide a complete statistical analysis of the stochastic relationship between random
variables on average and for each quantile. Roger Koenker and Gilbert Basset were the founders of
quantile regression in 1978; this finding is the development of median regression to overcome the
weaknesses of the Ordinary Least Square (OLS) method (Koenker & Basset, 1978). Due to the
heterogeneity of the data, there could be more than two groups, so this median regression model
developed into a quantile regression (Wu and Liu, 2009). Buhai (2004) states that this quantile
regression is very useful if the data is not homogeneous or what can be called heteroscedasticity and is
not in a standard form, such as not symmetrical or not normally distributed, i.e., there is a tail in the
distribution or a truncated distribution.
Suppose the MSE profit value as a random dependent variable is in the quantile. That value
must be higher than the MSE profit variable, which is in the proportion, and lower than the MSE profit
variable value in the (1-𝜽) proportion. Therefore, half of the MSE profit variables will be above the
median value and half below the median. Likewise, with the division of quantiles, quartiles, percentiles,
and others. A similar interpretation of the value of each independent variable has been estimated but
is slightly different from OLS (Koenker & Hallock, 2001). Since it can be specified as a value between 0
and 1, the estimated coefficient will differ according to the quantile division performed.
Thus, the regression coefficients for each financial literacy variable, namely savings account
ownership, knowledge of official financial institutions providing loans, and education level, can be
obtained and compared for each MSE profit quantiles along the distribution line. The estimated
regression coefficients represent the change in the dependent variable resulting from the difference in
the independent variable for each population quantile. In this study, the estimated parameters for the
three quintiles are 0.25, 0.50, and 0.75, which reflect the effect of savings account ownership, knowledge
of official financial institutions providing loans, and education level on MSE profits in the lowest 25%
quantile position, the middle and the highest quantile. The 50% quantile of the MSE profit distribution
and the top group in the 75% position of the MSE profit distribution.
Model
The equations used for this method are:

𝑙𝑛𝑟𝑒𝑣! (𝜃) = 𝛽# + 𝛽$ 𝑒𝑑𝑢𝑐! + 𝛽% 𝑠𝑎𝑣𝑖𝑛𝑔_𝑙𝑖𝑡! + 𝛽& 𝑑𝑒𝑏𝑡_𝑙𝑖𝑡! + 𝛽' 𝑙𝑛𝑎𝑠𝑒𝑡! + 𝛽( 𝑑𝑠𝑒𝑐𝑡𝑜𝑟_𝑖1! + 𝛽) 𝑑𝑠𝑒𝑐𝑡𝑜𝑟_𝑖2!
+ 𝛽* 𝑙𝑛𝑒𝑥𝑝𝑒𝑛𝑑! + 𝛽+ 𝑑𝑚𝑎𝑙𝑒! + 𝛽, 𝑑𝑢𝑟𝑏𝑎𝑛! + 𝛽$- 𝑑𝑗𝑎𝑣𝑎! + 𝛽$$ 𝑑𝑦𝑒𝑎𝑟! + 𝜀𝑖
Notes:
𝑙𝑛𝑟𝑒𝑣 : profit (ln)
(𝜃) : quantile (Q0.25; Q0.50; Q0.75)
𝛽# : constant
𝛽$.$$ : coefficient
𝑒𝑑𝑢𝑐 : years of schooling (education)
𝑠𝑎𝑣𝑖𝑛𝑔_𝑙𝑖𝑡 : savings account ownership, 1=YES & 0=NO

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𝑑𝑒𝑏𝑡_𝑙𝑖𝑡 : knowledge of official financial institutions providing loans, 1=YES & 0=NO
𝑙𝑛𝑎𝑠𝑒𝑡 : aset (ln)
𝑑𝑠𝑒𝑐𝑡𝑜𝑟_𝑖1 : sector_i1, 1=Trade & 0=Others
𝑑𝑠𝑒𝑐𝑡𝑜𝑟_𝑖2 : sector_i2, 1=Production & 0=Others
𝑙𝑛𝑒𝑥𝑝𝑒𝑛𝑑 : household expenditure per Capita (ln)
𝑑𝑚𝑎𝑙𝑒 : gender of MSE owner, 1=Male & 0=Female
𝑑𝑢𝑟𝑏𝑎𝑛 : area, 1=Urban & 0=Rural
𝑑𝑗𝑎𝑣𝑎 : location, 1=Java & 0=Others
𝑑𝑦𝑒𝑎𝑟 : IFLS wave, 1=2014 & 0=2007
i : MSE ke-i
𝜀 : error term

RESULT AND DISCUSSION

Based on the sample data used, table 1 describes the descriptive characteristics of the 8,118 MSE
analyzed. The average profit of MSE as a whole sample per month is Rp. 1,161,692. It can be seen from
the standard deviation value of 2,346,495 which is very large and the deviation of the average value
with a large median; this indicates that the data has a very large distribution and is not normally
distributed.
Table 1. Descriptive statistics of variables
Savings Account Knowledge Of Financial
Profits Years of
Variables Ownership Institutions Providing Loans
(Rp) Schooling
(1=YES & 0=NO) (1=YES & 0=NO)
Full Sample
Observasi 8,118 8,118 8,118 8,118
Mean 1,161,692 0.34 0.99 8.12
Median 450,000 0 1 6
Std. Deviation 2,346,495 0.4756 0.7342 4.4274
Source: Indonesian Family Life Survey.
It can be seen that the savings account ownership of the MSE actors studied has an average
data concentration size of 0.34 and the size of the data spread, in this case, the standard deviation of
0.47. Next, the value of knowledge of the official financial institutions providing loans to MSE actors
under study has an average data concentration size of 0.99, and the size of the data spread in this case
is the standard deviation or variance of 0.73. Next, the education level of the MSE actors studied had a
data concentration measure of 8.24 years on average, and a size of data spread, in this case, a standard
deviation of 4.43.
The analysis conducted on the MSE profit research model can convey the estimation results
from the regression model and OLS (table 2). The results of the OLS regression estimation state that
each of these research variables influences MSE profits. In table 2, it can be seen that each research
variable has a different coefficient value, which is divided into three quantile groups (Q0.25; Q0.50;0.75)
with OLS Robust as a comparison.
This study indicates that the coefficient of ownership of a savings account (saving_lit) is
significantly positive for each quintile of MSE profit (lnrev). However, the perceived impact will be
smaller as the scale of the business grows. In other words, the ownership of a business owner's savings
account has a significant positive effect on MSE profits in Indonesia at all business scales, which is
higher than that of business owners who do not have a savings account. Furthermore, knowing official
financial institutions providing loans (debt_lit), the coefficient value for each MSE profit quantile (lnrev)
is significantly positive. However, the perceived impact will be smaller as the scale of the business
grows. In other words, knowledge of official financial institutions providing business owners with a
significant positive effect on MSE profits in Indonesia at all business scales is higher than business
owners who do not know official financial institutions providing loans. Meanwhile, for the education

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level (educ), the owner of MSE has a significant effect on the value of the logarithm of MSE profits (lnrev)
only in the upper-middle quantile, with the perceived impact getting bigger with the larger the scale of
business. In other words, the level of education of business owners has a significant positive effect on
MSE profits in Indonesia only on a medium to medium scale business, with the perceived impact
getting bigger with the larger the business scale.
Table 2. The estimation results of the quantile regression model and robust OLS on MSE profit
(1) (2) (3) (4)
Dependent Variable: Profit-ln (lnrev) OLS Q(0.25) Q(0.50) Q(0.75)
Independent Variables
Savings Account Ownership (saving_lit) 0.242*** 0.307*** 0.211*** 0.193***
(0.0308) (0.0483) (0.0353) (0.0305)
Knowledge Of Financial Institution 0.158*** 0.196*** 0.185*** 0.113***
Providing Loans (debt_lit) (0.0403) (0.0609) (0.0445) (0.0385)
Years of Schooling-education (educ) 0.00600* -0.00219 0.00877** 0.0178***
(0.00359) (0.00557) (0.00407) (0.00352)
Control Variables
Aset-Ln (lnaset) 0.0724*** 0.104*** 0.0783*** 0.0511***
(0.00354) (0.00475) (0.00347) (0.00300)
Sector_i1 (1=Trade dan 0=Others) 0.138*** 0.162*** 0.203*** 0.181***
(dsector_i1) (0.0386) (0.0611) (0.0447) (0.0387)
Sector_i2 (1=Production dan 0=Others) 0.149*** 0.181*** 0.206*** 0.157***
(dsector_i2) (0.0337) (0.0554) (0.0405) (0.0350)
gender of MSE owner (1=Male, 0.685*** 0.757*** 0.665*** 0.525***
0=Female) (dmale) (0.0292) (0.0463) (0.0339) (0.0293)
Household Expenditure per Capita-ln 0.505*** 0.443*** 0.443*** 0.530***
(lnexpend) (0.0228) (0.0350) (0.0256) (0.0221)
Location (1=Java, 0=Others) -0.164*** -0.152*** -0.155*** -0.156***
(djava) (0.0282) (0.0449) (0.0328) (0.0284)
Area (1=Urban, 0=Rural) 0.215*** 0.333*** 0.240*** 0.153***
(durban) (0.0296) (0.0467) (0.0342) (0.0295)
IFLS Wave (1=2014 dan 0=2007) (dyear) 0.153*** 0.0850* 0.234*** 0.282***
(0.0323) (0.0500) (0.0366) (0.0316)
Constant 4.450*** 4.097*** 5.259*** 5.223***
(0.292) (0.450) (0.329) (0.285)
Observations 8,118 8,118 8,118 8,118
R-squared 0.284
r2_p 0.150 0.169 0.195
Source: Indonesian Family Life Survey. Robust standard errors in brackets
***p<0.001, **p<0.01, *p<0.05
The theory of savings account ownership is in line with the theory of financial literacy because
savings account ownership is a component of financial literacy. Financial literacy is the ability to make
sound judgments and make effective decisions regarding the use and management of money (Schagen
S. 1997). This theory supports the research results, namely, with financial literacy, it can make the right
financial decisions so that it is expected to improve company performance. The results of Fatoki's
research (2014) state that financial literacy positively affects the ability to make financial decisions and
the welfare of corporate households, and company performance.
The theory of knowledge of official financial institutions providing loans is in line with the
financial literacy theory because knowledge of official financial institutions providing loans is a
component of financial literacy. The results of this study are in line with previous research conducted
by Aribawa (2016) and Ratnawati (2016), which stated that financial literacy can show a positive

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influence on business performance. In entrepreneurial behavior that is considered essential for business
growth and development.
The human capital theory is concerned with how people in an organization contribute their
knowledge, skills, and abilities to improve organizational capabilities (Taylor and Armstrong, 2014).
One of its abilities is how MSE actors are at the education level for the progress of their business. The
results of this study are in line with research conducted by McPherson (1996); Simanjuntak (2001); and
Saraswati (2008), which states that the level of education has a positive effect on the profits of MSE
entrepreneurs, that the higher the education level of the MSE owner or owner, the higher the
performance he will get.
In table 2, this study explains that if we use OLS, the effect is seen only in its entirety. When
viewed from the scale of the business in detail, the product cannot be generalized. However, this study
in fact shows more specific results in each quantile, so quantile regression is the right choice in this
study.

(a) (b) (c)

Figure 1. Graph of Regression Coefficient of Profit Quantiles for Micro and Small Enterprises
It can be described that the ownership of a savings account (saving_lit) from the lowest to the
highest quintile has a coefficient value that tends to decrease along the distribution line of the quantile.
The difference in the regression coefficient values for each quantile (0.307; 0.211; 0.193) was randomly
still around the mean value (OLS regression coefficient estimation result: 0.242) and the standard
deviation range (Figure 1, panel a). The equivalence test in Table 3 further shows no significant
difference in the regression coefficients for each quantile. This conclusion is given from the Equivalency
Coefficient F-test and Prob<F test values of 3.22 and (0.0400).
From Figure 1 panel b, it can be illustrated that the variable knowledge of the official financial
institution providing the loan (debt_lit). The regression coefficient value of knowledge of official
financial institutions providing lenders in each quintile from the lowest to the highest quintile has a
coefficient value that tends to decrease along the quantile distribution line (0.19561; 0.018498; 0.11331).
The difference in the regression coefficient value in each random quantile is still around the average
value (the result of the estimated OLS regression coefficient: 0.158) and the standard deviation range.
The equivalence test in Table 3 further shows no significant difference in the regression coefficients for
each quantile. This conclusion is given from the value of the Equivalency Coefficient F-test and Prob<F
of 1.74 and (0.1764).
Furthermore, the education level (educ) of MSE actors, the regression coefficient value of the
education level in each quintile from the lowest to the highest quintile, has a coefficient value that tends
to increase along the quantile distribution line (0.00219; 00877; 0.01782). The regression coefficient
values in each random quantile are still around the average value (the result of the estimated OLS
regression coefficient: 0.00600) and the standard deviation range. The equivalence test in Table 3 further
shows no significant difference in the regression coefficients for each quantile. This conclusion is given
from the Equivalency Coefficient F-test and Prob<F test values of 8.11 and (0.0003).
To test whether the difference in the effect of the savings accounts ownership variable,
knowledge of the official financial institution providing the loan and education level, as well as the
suitability of the use of the quantile regression model, can be seen in Table 3. indicated from the

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significant difference in the regression coefficients for each MSE profit quantile only for the savings
account ownership variable (saving_lit) and education level (educ) (Prob>F less than 0.05). In contrast,
the knowledge variable for the official financial institution providing the loan (debt_lit) the difference
is not significant. But overall (complete model), the use of the quantile regression model is very
appropriate because the alpha test value (Prob>F) is smaller than 0.05. The conclusion of the feasibility
of using the quantile regression model is also supported by the results of the heteroscedasticity test
(BreuschPagan/Cook-Weisberg test for heteroskedasticity) with the null hypothesis of constant
variance, giving the results of chi2 of 226.51 with Prob > chi2 which is smaller than 0.05 for the semilog
model.
Table 3. Heteroscedasticity Test and Equivalence Test of Regression Coefficient
Equivalence Test*
Savings Knowledge Of Years of
Dependent Variable Account Financial Institutions Schooling
Ownership Providing Loans (educ)
(saving_lit) (debt_lit)
Profits (lnrev) 3.22 (0.0400) 1.74 (0.1764) 8.11 (0.0003)
*Equivalency Coefficient F test (Prob<F)
^ Breusch-Pagan / Cook-Weisberg (Prob<chi2) 226.51
Source: Indonesian Family Life Survey.

CONCLUSSION

From the analysis that has been carried out, the median estimate (Q0.50) in the quantile regression
provides a conclusion similar to the OLS estimate for the savings account variable, knowledge of official
financial institutions providing loans, and education level of business actors. Savings accounts,
knowledge of the lender's official financial institutions, and education level affect MSE's profitability.
However, the quantile regression results provide a more comprehensive estimate that differs for each
quantile group of MSE profits.
For savings account ownership of MSE owners, the effect on MSE profits gets smaller with the
higher MSE profit quintile group, with significant differences in all MSE profit quintile groups.
However, the effect is lower than for business owners who do not have a savings account. And
knowledge of the lender's official financial institution, the effect on MSE profits gets smaller with the
higher MSE profit quintile group, with significant differences in all MSE profit quintile groups.
However, the effect is lower than for business owners who do not know the official financial institution
providing the loan. While the education level of MSE actors has a greater influence on MSE profits with
the higher MSE profit quintile group, the difference is only significant in the middle and upper MSE
profit quintile group. When compared with the OLS estimate, with a one-point average estimate, it can
be seen that the OLS regression gives a lower estimate (underestimate) for the larger MSE profit
quantile group and a higher estimate (overestimate) for the smaller MSE profit quantile group.
Judging from the conclusion that MSE profits are in line with savings accounts, knowledge of
official financial institutions providing loans, and the education level of MSE owners, this condition is
related to MSE originating from poor and unemployed households (Lateh et al., 2017), it is necessary
to play a role from the government to provide training and coaching to improve the business
capabilities of MSE actors so that in the end they can increase MSE profits in Indonesia.
As development for further research, given the unique characteristics of IFLS data, further
research on the benefits of MSE can use other variables related to household characteristics, business
characteristics, and regional characteristics and also conduct a longitudinal analysis not only to see the
profits of MSE but also its development from time to time.

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