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16th International Symposium on Management (INSYMA 2019) Financial inclusion on small medium enterprise A. Z. Arifin & Yanuar Tarumanagara University, Jakarta, Indonesia N. N. Sawitri Trilogi University, Jakarta, Indonesia ABSTRACT: This study aims to examine the influence of Social Capital, Financial Attitude, and Financial Self Efficacy on Financial Inclusion. This research was conducted on Micro, Small, and Medium Enterprises (MSME) in Jakarta in 2018. The sampling method is incidental sampling. The subject of this research was MSMEs in Jakarta from various business fields. The sample in this study was 430 respondents who filled a questionnaire posed by the researchers. Data was processed using SmartPLS 3.0. The results show that Finan- cial Attitude positively affects Financial Inclusion, while Social Capital and Financial Self Efficacy have no effect on Financial Inclusion. Keywords: social capital, financial attitude, financial self efficacy, financial inclusion 1 INTRODUCTION The large contribution of MSMEs to the Indonesian economy is the basis for the growth of the MSME sector. Thereby, the sector is a source of encourag- ing economic growth, reaching an equitable distribu- tion of income, and alleviating poverty. One way that the government can do is to create a financial system that can be achieved through access to ade- quate finance (Financial Inclusion). The fact is that until now, MSME players have low financial inclusion. This contributing factor is due to the low level of public education regarding finances, low public financial facilities, inadequate financial information distribution, and low support- ing policies/regulations. The last survey conducted by the World Bank in 2014 showed that Indonesia's financial inclusion was only 36%. This indicator is in the form of account ownership informal financial institutions. The result of a Bank Indonesia survey in 2010 stated that 62% of households did not have a savings account at all. This condition is getting worse in rural communities (Setiawan 2017). 60- 70% of Micro, Small and Medium Enterprises (MSMEs) also do not have access to banking (Neng- sih 2015). Urata (2000) stated that the main problem faced by MSMEs is the number of MSMEs that are not yet bankable. There are still many MSMEs that don't know formal financial institutions, especially their services. This background is an urgent reason for implementing the Financial Inclusion. One of the important things related to Financial Inclusion is Social Capital. Social Capital is a net- work of relationships that facilitates access to re- sources including knowledge and skills. Reagans & McEvily (2003) explain that social networks act as a channel for the transfer of knowledge and infor- mation among the poor. Bastelaer (2000) and Woolcock (1999) point out that social capital gener- ates information channels, facilitates transactions, and reduces costs of accessing financial services such as credit. The amount of one's ability to have financial in- clusion also affects the financial attitude. Pankow (2003) defines Financial Attitudes as a state of mind, opinions, and judgments about finances. Hayhoe et al. (1999) utter that there is a relationship between Financial Attitudes and the level of financial prob- lems. Thus it can be said that one's financial attitude also influences the way a person manages his finan- Copyright © 2019, the Authors. Published by Atlantis Press. This is an open access article under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/). cial behavior especially in accessing and financial services. Sandler (2000) proposes the Social Cognitive Theory (Social Cognitive Theory or SCT). SCT has the role of cognitive thinking in motivating individ- uals and directing their financial behavior related to Financial Self Efficacy (FSE). The FSE refers to a measure of the belief that someone has used finan- cial services and services in a financial context. The result of the research in relating to Finan- cial Literacy is based on several research models. Mindra & Moya (2017) use the FSE variable as a mediating variable, Financial Attitude and Financial Self Efficacy as independent variables as well as Fi- nancial Inclusion as a dependent variable. Zuze et al. (2017) conduct a study using the FSE variable as an independent variable and Financial Inclusion as the dependent variable. Mpeera-Ntayi et al. (2017) apply the variable of Financial Literacy (Financial Litera- cy) as a mediating variable, Institutional Framing as an independent variable, and Financial Inclusion as the dependent variable. Malinga et al. (2017) use the variables of Capability (Skill), Knowledge, Behav- ior, and Attitude as independent variables and Fi- nancial Inclusion as the dependent variable. NkoteNabeta et al. (2016) apply the variable of So- cial Capital as a mediating variable, Financial Liter- acy as an independent variable, and Financial Inclu- sion as the dependent variable. Based on the background and results of previous studies, the purpose of this study is to examine the relationship between Social Capital, Financial Atti- tude and Financial Self Efficacy (FSE) on Financial Inclusion. 2 RESEARCH METHODS The subject in this study was Micro, Small and Me- dium Enterprises (MSMEs) in Jakarta The object in this study was Social Capital, Financial Attitude, Fi- nancial Self Efficacy, and Financial Inclusion. The data used are primary data obtained from the sample by filling in questionnaires distributed to MSME ac- tors who are domiciled in Jakarta. The four variables are latent variables which are measured using indica- tors with a Likert-scale 1-5. The statistical test used is the test of the outer and inner model. The collect- ed data was then tested using Pro-PLS Version 3.0 analysis software. 3 RESULTS AND DISCUSSIONS Data analysis was done with the outer and inner models. The outer model was used to test validity and reliability. The inner model was used to test structural models of this research. Loading factors and convergent validity were used to test validity. The indicator is valid if it has a value of loading fac- tor above 0.5 (Hair et al. 2011). The inner model test is done to test the structural model. This test used Bootstrapping. This test includes the test of goodness of fit and statistical hypothesis. The good- ness of fit test results use NFI criteria. NFI values range from 0-1, getting closer to 1, the model is get- ting better (Hair et. al. 2011). The NFI value of the research model is 0.841, so the model is declared fit. The test of hypothesis is presented in equation (1). FI=-0,006SC +0,15 FA + 0,07FSE (1) 0,794 ,001** 0,856 Based on Equation (1), it is concluded, first, Fi- nancial Attitude (FA) had a positive influence on Fi- nancial Inclusion (FI). Moreover, it is indicated that the Social Capital (SC) and Financial Self Efficacy (FSE) variables do not significantly influence Finan- cial Inclusion (FI). This study used 430 MSME respondents in Jakar- ta who are still active in carrying out their business. The result of the test is for the influence of exoge- nous variables Social Capital, Financial Attitude, and Financial Self Efficacy on endogenous Financial Inclusion variables. 3.1 Effect of Social Capital on Financial Inclusion The results show that social capital has no effect on Financial Inclusion. With this result, it can be con- cluded that whether or not a person's social capital is good, wherein social capital, there is information about various types of alternative financial products and services (financial inclusion), which does not provide the opportunity for those people to have a higher level of financial inclusion. Thus social capi- tal is not used as a determining factor for someone in determining, utilizing the products or financial ser- vices that they will have and reducing the existing obstacles, but there is another factor, namely educa- tion. The result of this study is not in accordance with previous research conducted by Saputra & Dewi (2017) that point out a positive and significant role of social capital. 3.2 Effect of Financial Attitude on Financial Inclusion The results of the test show that Financial Attitude had a positive influence between on Financial Inclu- sion. The result of this study is in accordance with previous studies conducted by Malinga et al. (2017) that indicates Financial Attitude had a positive influ- ence on Financial Inclusion. With this result, it can be concluded that financial attitude had an influence on individual financial inclusion in the aspects of valuation in making financial decisions such as sav- ings, credit, insurance, and remittances which ulti- mately affect the financial inclusion and welfare of the individual. 3.3 Effects of Financial Self Efficacy on Financial Inclusion The results of the test show that Financial Self Effi- cacy had no effect on Financial Inclusion. With this result, it can be concluded that trust/confidence is not a determining factor for someone who will use financial products/services. Trust is not enough for someone who wants to use financial prod- ucts/services, because someone who is confident in a financial product/service offered by a financial insti- tution, not necessarily will use these products and services. This happens because there are other fac- tors such as not being able to fulfill the requirements requested by the financial institution so that they cannot use the financial products/services offered, whereas previously they had the trust /confidence to be able to use them. The result of this study is not in line with the research conducted by Zuze et al. (2017) that says Financial Self Efficacy has a posi- tive and significant effect on Financial Inclusion. 4 CONCLUSION Based on the results of the analysis and discussion, it can be concluded that: (1). Financial Attitude had a positive effect on Financial Inclusion of MSME in Jakarta, and (2). Social Capital and Financial Self- Efficacy had no effect on the Financial Inclusion of MSME in Jakarta. 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