Effect of Demographic Factors and Financial Training towards the Level of Financial Literation of Crafts and Furniture SMEs in Sleman District

The low level of financial literacy SMEs are one of the causes of the lack of access to financial institutions in this sector. The SMEs tend to lack understanding of financial products offered by other financial institutions so that they are only able to depend on conventional banking financing. This is the background of the research. To analyze the data using descriptive statistics and multiple regression. Based on the results of data analysis, it was concluded that the average level of financial literacy of crafts and furniture business owners in the Sleman sub-district has a fairly high level of financial literacy. The level of literacy is significantly influenced by demographic factors and financial training, both together (simultaneously) and each variable. The lowest value of financial literacy is in financial planning. 1 BACKGROUND PROBLEM Indonesia is a country that has the 4th largest population in the world, with a total population of more than 265 million people, ranked one below the superpower, namely the United States, which has a population of more than 362 million inhabitants. Although the population of Indonesia always increases every year, according to data from the Central Statistics Agency in March 2018, the poverty rate has decreased to 9.82%. This figure is certainly an extraordinary achievement, considering that since 1999, the percentage of Indonesian poverty has always consisted of 2 digit numbers. The success of reducing the percentage of poverty is inseparable from the role of Small and Medium Enterprises (SMEs), according to Katadata.co.id in 2016 the SMEs sector has been able to dominate 99.9% of business units in Indonesia and able to absorb almost 97% of the Indonesian workforce. From this figure, the types of micro-businesses absorb the most workforce by 87%, medium businesses by 4%, small businesses by 5.7%, while large businesses can only absorb 3.3%. According to a survey conducted by the Ministry of Cooperatives proving that the competitiveness of SMEs in Indonesia is quite good, a survey conducted by the Financial Services Authority (OJK) in 2016 showed that the financial literacy rate in Indonesia was 29.6%, and financial literacy for SMEs actors by 27.7%. This figure is an increase compared to the results of the 2013 FSA survey, which was still 21.8%. However, this figure is relatively small when compared to the level of financial literacy in other Southeast Asian countries. The OJK survey in 2016 divides the level of national financial literacy into conventional, sharia, and mixed (composite) categories. The conventional financial literacy rate is 29.5%, sharia 8.1%, and composite 29.7%. The people with the highest average financial literacy level were DKI Jakarta at 40%, and the lowest in West Papua at 19.27%, while DI Yogyakarta was ranked 3rd with a large percentage of 38.55%. The Governor of Bank Indonesia (BI) Agus DW Martowardjojo revealed, the problems in running Micro, Small and Medium Enterprises (SMEs) are not limited to financial management and limited resources management, but also access to capital owned by business actors. The low level of financial literacy of SMEs is one of the causes of the lack of access to financial institutions in the sector. The SMEs tend to lack understanding of financial products offered by other financial institutions so that they are only able to depend on manual and conventional banking financing, until 2016 the Gusaptono, R. , Pudjiharjanto, C. and Fadzilah, Y. Effect of Demographic Factors and Financial Training towards the Level of Financial Literation of Crafts and Furniture SMEs in Sleman District. DOI: 10.5220/0009960006310638 In Proceedings of the International Conference of Business, Economy, Entrepreneurship and Management (ICBEEM 2019), pages 631-638 ISBN: 978-989-758-471-8 Copyright c © 2020 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved 631 number of adults who have bank accounts only reaches 36%. According to Abdulloh Mubarok and M. Faqihudin (2011), in general, SMEs ' problems can be classified into external problems and internal problems. Internal problems include the quality of human resources, capital, financial administration, or accounting, while external problems include the business climate, market access and facilities, and infrastructure. In general, the activities of SMEs only emphasize the production and marketing fields, while the financial reporting activities are ignored. The activities of preparing financial statements, are still considered luxurious and not yet comparable to their uses. As a result, the SMEs do not know exactly how much income should be received, how much operating costs should be incurred, and how much should be left, which they know is only the current financial condition. Yogyakarta Special Region is one of the provinces with the highest level of financial literacy number 3 in Indonesia, according to the results of a survey conducted by the OJK in 2016. However, according to the Head of the UMKM Office and the Yogyakarta Special Region Cooperative, Tri Saktiyana said that based on field observations, almost 98% of SMEs do not understand how to organize financial statements properly. Therefore, the SMEs cannot calculate profits accurately, so that the development of the business scale is hampered. Also, according to Tri Saktiyana, the absence of a neat checking account makes them unable to access the People's Business Credit (KUR). The SMEs who have been able to access KUR is only around 10%, while the rest are still in the form of startup funded by cooperatives and own capital. According to the Head of the UMKM Division of the Yogyakarta UMKM and Cooperative Office, Agus Mulyono, there are still around 238,000 SMEs in Yogyakarta. Of this amount, 60% of them are micro-businesses, and around 30% are small businesses, the remaining 10% are medium businesses. Agus Mulyono said that the difficulty of SMEs entrepreneurs to access the capital was because the SMEs did not make business plans when starting a business, because the majority of them only followed trends the existing. In general, according to the Yogyakarta Central Statistics Agency (BPS), the business climate in Yogyakarta is somewhat conducive, as evidenced by an increase in production growth of large and medium manufacturing industries (IBS) in the fourth quarter of 2016 increased by 12.8% compared to the same period in 2015. The increase in Yogyakarta's IBS growth index in 2016 was boosted by positive growth in almost all types of industries. Among them the food industry, apparel, rubber, rubber and plastic goods, machinery industry, and equipment and crafts and furniture. Many variables affect someone's financial literacy, including demographic factors and financial knowledge. Previous research conducted by Chen and Volpe (1998) states that men have higher financial literacy than women. It is supported by research conducted by Jeyaram and Mustapha (2015) that men have better levels of financial literacy than women. Apart from gender, education, age of manager, and length of business are also aspects that affect a person's level of financial literacy. Also supported by the results of a study conducted by Bonita and Setiawina Nyoman Djinar (2017) that simultaneously variables of education level, length of business, and gender significantly influence the level of financial literacy. But according to the results of a study by Cynthia Nur Fitriana Ichwan (2016) found that education affects financial literacy while demographics and length of business do not affect financial literacy. This was also supported by the results of a study conducted by Mukhtar et al. (2017) that found that the level of education, age, and length of business did not affect financial literacy, but training influenced financial literacy. Yogyakarta Special Region Province is included in the top 3 provinces with a high level of financial literacy of its citizens in Indonesia, especially SMEs in Yogyakarta itself from year to year, always experiencing an increase. One of the regencies that has the highest number of SMEs in Sleman Regency, with the most distribution being in Sleman District. To be a known level of financial literacy of SME crafts and furniture that is in the district of Sleman, the researchers were motivated to research.