Financial literacy and sustainability of rural microfinance: The mediating effect of governance

Figures & data

Figure 1. Research framework.

Table 1. Variable measurement

No.	Variable	Operational definition	Scale
1.	Education	The highest level of education completed by the respondents.	Ordinal (See: Questionnaire)
2.	Age	The grouping category appropriate for the respondent’s age.	Interval (See: Questionnaire)
3.	Occupation	The respondent’s role in society and it can be a job, business, employment or profession.	Ordinal (See: Questionnaire)
4.	Financial literacy	The capacity to efficiently manage respondent’s financial resources for lifetime financial stability.	5 Likert (See: Questionnaire)
5.	MFI governance	Decision-making and implementation procedures at MFIs.	5 Likert (See: Questionnaire)
6.	MFI sustainability	MFIs incorporate the economic, social, and environmental aspects of sustainability.	5 Likert (See: Questionnaire)

Figure 2. PLS-SEM framework.

Table 2. FLI score for model 1

FLI score	Model 1
4–18.5	Low
>18.5–33	Medium
>33–47.5	High

Table 3. FLI score for model 2

FLI score	Model 2
4–34.08	Low
>34.08–47.5	High

Table 4. Respondent characteristics based on gender and financial literacy

Model 1				Model 2
FLI	Male	Female	Total	FLI	Male	Female	Total
Low	5	3	8	Low	46	37	83
Medium	35	26	61	High	53	64	117
High	59	72	131	Total	99	101	200
Total	99	101	200

Table 5. Respondent characteristics based on age, gender and financial literacy

Model 1
Age	Low FLI		Medium FLI		High FLI		Total
	Male	Female	Male	Female	Male	Female
$\le$ 20	0	0	3	0	3	3	9
21–25	1	0	7	2	4	11	25
26–30	0	0	7	4	5	9	25
31–35	0	0	5	6	7	10	28
36–40	0	0	5	2	11	12	30
$\ge$41	4	3	8	12	29	27	83
Total	5	3	35	26	59	72	200

Table 6. Respondent characteristics in education, gender and financial literacy

Model 1
Education	Low FLI		Medium FLI		High FLI		Total
	Male	Female	Male	Female	Male	Female
No education	1	0	2	1	6	5	15
Primary school drop out	3	2	18	9	19	13	64
Primary school	0	0	2	5	9	10	26
Junior High School	0	0	3	2	7	14	26
Senior High School	0	0	8	8	11	22	49
Diploma	0	0	1	0	2	5	8
University	1	1	1	1	5	3	12
Total	5	3	35	26	59	72	200

Table 7. Respondent characteristics in employment, gender, and financial literacy

Model 1
Occupation	Low FLI		Medium FLI		High FLI		Total
	Male	Female	Male	Female	Male	Female
Teacher	0	0	0	0	2	5	7
Housewives	0	1	0	11	1	43	56
Government Officers	0	0	0	0	1	0	1
Religion leaders	0	0	0	0	0	0	0
Community Leaders	0	0	0	0	0	1	1
Military/Police	0	0	0	0	0	0	0
Private employee	0	0	0	0	0	0	0
Entrepreneurs	0	0	0	1	2	0	3
Farmer	5	2	35	14	53	23	132
Others	0	0	0	0	0	0	0
Total	5	3	35	26	59	72	200

Table 8. Descriptive statistics of empirical indicators in model 1

FL indicators	Mean	Min	Max	Std dev.	Model 1	Model 2
Identity Requirement	4.39	0	5	1.486	High	High
Amount of Money	3.355	0	5	2.243	High	High
Minimum balance	2.84	0	5	2.151	Medium	High
Time Deposit	2.085	0	5	1.891	Medium	Low
Simple Interest	2.35	0	5	2.073	Medium	Low
Compound Interest	2.55	0	5	2.041	Medium	Low
Loan interest	3.165	0	5	1.961	Medium	High
Price Discount	3.805	0	5	1.817	High	High
Inflation	3.46	0	5	1.851	High	High
Time value of money	3.765	0	5	2.009	High	High
Money illusions	3.895	0	5	1.651	High	High

Notes: Model 1: Mean 0–1.66 (Low); 1.67–3.33 (Medium); 3.34–5 (High).

Model 2: Mean 0–2.5 (Low); 2.6–5 (High).

Figure 3. PLS-SEM diagram.

Table 9. Validity and reliability measurement

Latent variable	Reflective model	Outer loadings	Average variance extracted	Cronbach’s alpha	Composite ratio	rho A
Financial Literacy	LK1 → Lit.	0.473	0.310	0.626	0.753	0.643
	LK2 → Lit.	0.539
	LK3 → Lit.	0.554
	LK4 → Lit.	0.544
	LK5 → Lit.	0.704
	LK6 → Lit.	0.629
	LK7 → Lit.	0.398
Governance	TK1 → Gov.	0.477	0.494	0.736	0.826	0.773
	TK2 → Gov.	0.703
	TK3 → Gov.	0.694
	TK4 → Gov.	0.814
	TK5 → Gov.	0.778
Sustainability	KK1 → Sus.	0.501	0.351	0.830	0.865	0.834
	KK2 → Sus.	0.523
	KK3 → Sus.	0.632
	KK4 → Sus.	0.570
	KK5 → Sus.	0.560
	KK6 → Sus.	0.529
	KK7 → Sus.	0.576
	KK8 → Sus.	0.656
	KK9 → Sus.	0.739
	KK10 → Sus.	0.627
	KK11 → Sus.	0.530
	KK12 → Sus.	0.625

Table 10. Hypothesis testing

Path	β	Std. dev	T statistics	p Values
Financial Literacy → Governance	0.476	0.077	6.213	0.000***
Financial Literacy → Sustainability	0.317	0.088	3.618	0.000***
Governance → Sustainability	0.550	0.100	5.475	0.000***
Financial Literacy → Governance → Sustainability	0.262	0.058	4.519	0.000***
Sobel Test	Test Statistic		Std. Dev	p Values
Financial Literacy → Governance → Sustainability	4.109		0.064	0.000***

Notes: ***significant at 0.001 level.

Table 11. Respondent characteristics in age, gender and financial literacy

Model 2
Age	Low FLI		High FLI		Total
	Male	Female	Male	Female
Below 20	3	2	3	1	9
21–25	9	6	3	7	25
26–30	7	4	5	9	25
31–35	5	6	7	10	28
36–40	5	2	11	12	30
Above 41	17	17	24	25	83
Total	46	37	53	64	200

Table 12. Respondent characteristics in education, gender and financial literacy

Model 2
Education	Low FLI		High FLI		Total
	Male	Female	Male	Female
No education	4	2	5	4	15
Primary school drop out	23	12	17	12	64
Primary school	3	5	8	10	26
Junior High School	4	3	6	13	26
Senior High School	9	13	10	17	49
Diploma	1	0	2	5	8
University	2	2	5	3	12
Total	46	37	53	64	200

Table 13. Respondent characteristics in employment, gender, and financial literacy

Model 2
Occupation	Low FLI		High FLI		Total
	Male	Female	Male	Female
Teacher	0	2	2	3	7
Housewives	0	15	1	40	56
Government Officers	0	0	1	0	1
Religion leaders	0	0	0	0	0
Community Leaders	0	1	0	0	1
Military/Police	0	0	0	0	0
Private employee	0	0	0	0	0
Entrepreneurs	0	1	2	0	3
Farmer	46	18	47	21	132
Others	0	0	0	0	0
Total	46	37	53	64	200

Table

1. Interview Date [dd/mm/yyyy]		□□ □□ □□□
GENERAL INFORMATION Purpose: to obtain data about the general characteristics of respondents
2. Name of respondent: Fill in the respondent’s number code based on the order of the interview (001 etc.)		□□□
3. Village/Address:
4. Subdistrict:
5. Regency/city:
6. Respondent’s age:		□□
7. Gender: 1 = Male 2 = Female		□
8. Religion and Beliefs: 1 = Protestant 2 = Catholic 3 = Islam 4 = Hindu 5 = Buddha 6 = Other beliefs, Mention …….		□
9. Highest level of education completed: 1 = Never attended school 2 = Did not finish elementary school 3 = Graduated from Elementary School (SD) 4 = Completed high school (SLTP/SMP/equivalent) 5 = Graduated from high school (SMA/SMK/equivalent) 6 = Graduated from Academy (D3/D2/D1) 7 = Graduated from Bachelor (S1)		□
10. Engagement in Microfinance: 1 = Yes, as a member 2 = Yes, as administrator 3 = Not involved yet		□
11. If you answered Yes to number 10, when did you start getting involved in Microfinance? 1 = Prior to 2000, state the year……… 2 = After 2000, state the year………		□
12. Work: 1 = Teacher 2 = Housewife 3 = State civil apparatus 4 = Religious leaders 5 = Public figure 6 = TNI/POLRI 7 = Private employees 8 = Self-employed 9 = Farmer 10 = Other, Mention……		□
13. Years worked:		………. years
14. Monthly Income, 1 = Less than Rp. 1 Million, Mention…………. 2 = Rp. 1 Million—Less than Rp. 2 Million, Mention…………. 3 = Rp. 2 Million—Less than Rp. 4 Million, Mention ………… 4 = Rp. 4 Million—Less than Rp. 6 Million, Mention ………… 5 = Rp. 6 Million—Less than Rp. 8 Million, Mention ………… 6 = Rp. 8 Million—Less than Rp. 10 Million, Mention………… 7 = Above Rp. 10 Million, Mention………….		□
15. Current assets: 1 = Animals/Livestock, Total: ……….heads 2 = Land, Area: ……….M 2/Hectare 3 = Building, Area: ……. M 2 4 = Garden, Area: ………. M 2/Hectare 5 = Vehicles, Please specify…………. 6 = Others, Specify ………………
16. Financial Product Ownership: 1 = Savings account at the bank 2 = Deposit account at the bank 3 = Savings account at a non-bank financial institution (LKNB) 4 = Deposit accounts at non-bank financial institutions (LKNB) 5 = Insurance and or unit link 6 = Lottery club 7 = Does not have any financial products 8 = Others, Specify ………………

Table

Code	Variable	Question	Answer
E.1	Identity Requirements	Do you need an identity card (KTP/SIM) to open a savings account at the bank?	1. Yes 2. No 3. I don’t know Reason: ….
E.2	Minimum amount of money to open a savings account	Do you have to deposit a certain amount of money as an initial deposit to set up a savings account at the bank?	1. Yes 2. No 3. I don’t know Reason: ….
E.3	Minimum balance in savings account	Is there a minimum fund that must be deposited in a savings account (non-withdrawable)?	1. Yes 2. No 3. I don’t know Reason: ….
E.4	Deposits guaranteed by the government	If the bank where you save goes bankrupt, are your savings guaranteed by the government?	1. Yes 2. No 3. I don’t know Reason: ….
E.5	Simple Interest	For example, you have a savings of IDR 1,000,000 with an interest of 4% per year (assuming there are no administration fees, no depositing/withdrawing savings), then exactly 1 year later, will the amount of money in your savings increase?	1. Yes 2. No 3. I don’t know Reason: ….
E.6	Compound interest	For example, you have a savings of Rp. 1,000,000 with an interest of 4% per year (assuming there are no administration fees, no depositing/withdrawing savings), then exactly 2 years later, will the amount of money in your savings experience a greater increase compared to the increase in the previous year? First?	1. Yes 2. No 3. I don’t know Reason: ….
E.7	Calculating loan interest	For example, you apply for a bank loan of Rp. 1,000,000 with a loan term of 1 year and an interest of 5% per year, then you will spend Rp. 1,050,000 to pay off the loan.	1. Yes 2. No 3. I don’t know Reason: ….
E. 8	Discounted Price (Discount)	When you want to shop for household needs, you prefer to shop at Store A, which offers a 20% discount on the initial price of IDR 1,000,000, compared to buying the same product and price at Store B with a discount of IDR 100,000.	1. Yes 2. No 3. I don’t know Reason: ….
E. 9	Inflation	You have savings of IDR 1,000,000 with an interest rate of 1% per year and an inflation rate of 2%. If the savings are used today, it can be used to buy 50 kinds of household goods. However, one year later, if the savings were spent, it would only be enough to buy less than 50 of the same items as before.	1. Yes 2. No 3. I don’t know Reason: ….
E.10	Time value of money	You choose between earning Rp. 10000,000 today, compared to getting Rp. 10000,000 in 5 years.	1. Yes 2. No 3. I don’t know Reason: ….
E.11	Money illusion	If your income doubles next year and the prices of all goods double, then the amount of goods you can buy next year will be less than the previous year.	1. Yes 2. No 3. I don’t know Reason: ….

Table

No.	Statement	SA	A	N	D	SD
LK1	In my opinion, looking for a loan with low interest will benefit my business
LK2	I think it’s important to set aside money for contingencies
LK3	In my opinion, protecting yourself from the risk of accidents, etc. can be done by buying a life insurance policy
LK4	In my opinion, incoming money will be recorded on the debit side and outgoing money will be recorded on the credit side
LK5	In my opinion, making a cash budget is important to determine priorities for the use of funds
LK6	In my opinion, saving money in several types of assets will reduce the risk of loss
LK7	In my opinion, a bank is a financial institution that serves the deposit and lending of money as well as carrying out payment functions

Table

No.	Statement	SA	A	N	D	SD
TK1	Managers of microfinance institutions manage finances in a professional manner
TK2	Microfinance institutions monitor the financial condition of members
TK3	Microfinance institutions have orderly administration
TK4	Microfinance institutions help finding solutions for members facing financial problems
TK5	Microfinance institutions select administrators based on competence

Table

No.	Statement	SA	A	N	D	SD
KK1	Microfinance institutions channel funds according to the needs of members
KK2	The business of microfinance institutions is useful for improving the economies of its members
KK3	Microfinance institutions carry out management principles according to local culture
KK4	Microfinance institutions have skilled administrators
KK5	Microfinance institutions have access to adequate sources of funds
KK6	Microfinance institutions have the opportunity to develop businesses to increase the economic capacity of their members
KK7	Microfinance institutions provide soft loans for environmentally conscious businesses
KK8	Microfinance institutions provide lighter credit terms for businesses that care about the environment
KK9	Microfinance institutions do business efficiently to reduce wastage of resources
KK10	Microfinance institutions participate in campaign to reduce land burning
KK11	Microfinance institutions encourage the usage of used goods in their activities (used paper for envelopes, etc.)
KK12	Microfinance institutions support recycling activities

Table

No.	Statement	SA	A	N	D	SD
FA1	I want to know more about money management
FA2	I feel more satisfied spending money than saving it for the long term
FA3	I know how to manage money
FA4	I am ready to risk some of my own money to save or invest
FA5	I am interested in reading and learning more about financial literacy
FA6	I think money is available to spend
FA7	I can control my financial situation
FA8	I read to increase my knowledge in finance

Table

No.	Statement	SA	A	N	D	SD
FB1	Before I buy something, I consider carefully whether I can afford it
FB2	I put a close attention to my personal financial affairs
FB3	I think make a saving plan is important
FB4	I (We) pay our bills on time
FB5	I (We) create a plan to manage our revenue
FB6	I (We) create a plan to manage our investments
FB7	I (We) plan our expenses
FB8	I (We) control whether income and expenses are within budget

Table

No.	Statement	SA	A	N	D	SD
FK1	A high return investment tends to have a high risk
FK2	If someone offers you the opportunity to make a lot of money, you will likely loose a lot of money too
FK3	The high price of goods causes the cost of living to increase rapidly
FK4	Apart from saving at the bank, I bought assets such as land, horses, cows, buffaloes, pigs and so on
FK5	It is unlikely that you will lose all your money if you diversify it
FK6	Saving in a bank is safe and risk free
FK7	If prices rise rapidly, the money people have in savings accounts will lose its value

Data availability statement

This manuscript has no associate data.