THE EFFECT OF FINANCIAL LITERACY ON SALES GROWTH THROUGH PRODUCT INNOVATION IN MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs) IN SOUTH JAKARTA

Abstract

This study aims to analyze the effect of financial literacy on the sales growth of MSMEs in South Jakarta, both directly and indirectly through product innovation as a mediating variable. MSMEs play an important role in the Indonesian economy, but often face challenges in financial management and innovation. This study employs a quantitative approach using a survey method targeting 120 SME operators registered with the South Jakarta SME Development Agency. The research instrument consists of a questionnaire using a Likert scale, and data analysis was conducted using SEM-PLS techniques with SmartPLS 4.0. The results indicate that financial literacy has a significant positive impact on product innovation and sales growth. Product innovation also has a significant impact on sales growth and is proven to be a significant mediating variable between financial literacy and sales growth. This study contributes theoretically to the literature on SMEs and has practical implications for business owners and policymakers in designing sustainable SME empowerment strategies through improved financial literacy and product innovation development.