Volume 7, Issue 12, December – 2022 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165

Contribution of Financial Literacy and

Demographics on Investment Decision
Mohamad Agus Salim Monoarfa
Management Department
Faculty of Economics, Gorontalo State University
Indonesia

Mohamad Fajri Lamusu Rahmawati Dewi Jusuf

Management Department Management Department
Faculty of Economics, Gorontalo State University Faculty of Economics, Gorontalo State University
Indonesia Indonesia

Abstract:- This study examines and analyzes the when viewed from the number of people who are included in
contribution of financial literacy levels and demographics the productive age in 2020, it is 70.72% or 191,085,440 million
to investment decisions. The population in this study are people. When compared to the working age population group,
MSME actors spread across the Coastal Coast of the number of investors in the capital market is only 3.4%.
Gorontalo City, Indonesia. The research sample was 97
MSME actors. Sampling used non-probability sampling
method with purposive sampling technique. Data was The low percentage of the Indonesian population
collected by distributing questionnaires. The variables in participating in investment is caused by various factors such as
this study are financial literacy and demographics (age, the level of public knowledge of financial literacy and also the
education level, length of business, gender and income) as demographic conditions of the Indonesian people [2]–[4]. The
independent variables and investment decisions as the low level of financial literacy and demographic conditions have
dependent variable. The method used in this research is caused the ability of the Indonesian people to make decisions
multiple linear regression analysis. The results showed to have a number of investment instruments in Indonesia to be
that the variables of financial literacy, education level, very lacking. Data from the Financial Services Authority in
length of business and income level had a positive and 2019 shows that the financial literacy index in Gorontalo
significant impact on investment decisions for MSME Province is the lowest on the island of Sulawesi, which is only
actors. While the variables of age and gender were found 31.23% [5].
to have no significant effect on investment decisions.

Keywords:- Financial Literacy; Demography; Investment

Decision; MSME.

I. INTRODUCTION

Ownership of investment instruments in Indonesia in the

last four years shows an increasing trend. Opportunity for profit
is one of the reasons. Many potential investors are interested in
investing because it increases lucrative profits, but of course by
paying attention to the risks that must be borne. KSEI data as
of September 2021 shows the number of investors in Indonesia
based on Single Investor Identification (SID) growth as
follows: Fig. 1. Single Investor Identification (SID) in Indonesia
In figure 1, it can be seen that in the capital market as of The ownership of various investment instruments, both in
September 2021 there were 6,431,444 investors, C-BEST as the capital market and in the banking world, is very necessary
many as 2,908,954 investors, Mutual Funds with 5,784,899 to support the country's economy. The MSME sector is
investors and Government Securities as many as 571,794 expected to take advantage of these opportunities to invest. The
nvestors. This trend shows an increase from year to year since rapid growth of the MSME sector in Indonesia based on data
2018 for the four instruments in the capital market. from the Ministry of Cooperatives and SMEs of the Republic
of Indonesia (KEMENKOPUKM) in 2021 shows that the
Figure 1 above is an illustration that the knowledge of the number of MSMEs in Indonesia reaches 1,271,440 with the
Indonesian people towards investment tends to increase, but number of workers in the MSME sector reaching 2,584,212
when compared to the total population of Indonesia which is people [6]. If this can be maximized, it is likely that the number
270.2 million people in 2020 Kristianus (2021), the number of of investors in the capital market and in the banking industry
investors in the capital market is only Rp. 2.4%. Meanwhile, with investment instruments will also increase.

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Volume 7, Issue 12, December – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
II. LITERATURE REVIEW C. Financial Literacy and Investment Decision
Financial literacy is a set of community knowledge and
A. Investment skills in making effective decisions and policies by utilizing all
Investment is a delay in current consumption, to be used attractive financial resources. Financial literacy can be a
in a production process effectively and efficiently for a certain comprehensive and in-depth understanding of personal or
period. Sacrifice of current consumption, defined as an family financial management that makes a person have the
investment activity to obtain consumption in the future. This is power, understanding and full confidence in the financial
because the sacrifice of current consumption is intended to decisions taken.
produce more than one unit of consumption in the future.
OJK Regulation Number 76 of 2016 defines that financial
The thing that underlies an investment decision is how literacy is knowledge, skills and confidence that influence
much profit and risk the investor will accept. The level of profit attitudes and behavior to improve the quality of decision
to be obtained is related to the level of risk that will be accepted. making and financial management in order to achieve
The higher the level of expected profit, the higher the level of prosperity.
risk that may be accepted. Thus, this is a principle that is highly
considered by an investor in making investment decisions. Investment decisions are influenced by several factors
including financial literacy and demographic conditions of the
B. Type of Investment community in general and investors in particular. Fedorova et
Investments in financial assets can be in the form of direct al., (2015) in their research found that the average Russian
investments and indirect investments. Direct investment is citizen has a fairly low level of financial literacy. The findings
done by purchasing financial assets directly from a company, of his research show that: firstly, 39% of Russians know about
either through intermediaries or in other ways. On the other finance at a basic level, 29% know it at an advanced level and
hand, indirect investment is done by buying shares from 13% know about this finance in the Russian stock market
investment companies that have portfolios of financial assets (practitioners). Second, the level of financial literacy of
from other companies as shown in Figure 2. respondents (Russian citizens) affects their level of
participation in financial markets. In his research, it was found
that many respondents who have a level of education and
knowledge about finance are more active in the stock market,
invest savings for retirement and have fewer non-performing
loans in banks. Based on previous research and theoretical
studies, the first hypothesis in this study is

Hypothesis 1. Fnancial literacy has a significant effect on

investment decisions

The template is used to format your paper and style the

text. All margins, column widths, line spaces, and text fonts are
prescribed; please do not alter them. You may note
peculiarities. For example, the head margin in this template
Fig. 2. Direct and Indirect Investment
measures proportionately more than is customary. This
measurement and others are deliberate, using specifications
that anticipate your paper as one part of the entire proceedings,
Direct investment can be done by buying financial assets that and not as an independent document. Please do not revise any
can be traded in the money market, capital market or derivative of the current designations.
market. Direct investment can also be made by purchasing non-
tradable financial assets. Financial assets that cannot be traded D. Demographics and Investment Decision
are usually obtained through commercial banks. These assets Demographic factors play an important role in
can be in the form of savings in a bank or certificates of deposit. determining the investment decision to be selected. The
Meanwhile, assets that can be traded in the money market can influence of investor demographic factors needs to be
be in the form of assets that have a small failure risk, short considered, because in making investment decisions, investors
maturity with a high realization rate. often involve more than one individual. This means that
demographics are one of the factors that influence investment
Indirect investment is done by buying securities from decisions in Indonesia.
investment companies. An investment company is a company
that provides financial services by selling its shares to the Research conducted by Wahyuni & Astuti (2021) shows
public and using the funds obtained to be invested in its that demographically investment decisions are influenced by
portfolio. This means that the investment company forms a age and education level, which means that the more mature and
portfolio (hopefully the portfolio is optimal) and sells it retail the higher the education level of a person, the investment
to the public in the form of its shares. decisions will increase. On the other hand, factors that do not
affect investment decisions when viewed from a demographic
perspective are gender, income, type of work, marital status and

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Volume 7, Issue 12, December – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
investment experience. Based on previous research and Table 4.2. Coefficient
theoretical studies, the second hypothesis in this study is:

Hypothesis 2. Demographics have a significant effect on

investment decisions.

III. RESEARCH METHOD

This research was conducted using a quantitative

approach. The object of this research is SMEs in the coastal
city of Gorontalo. With a total sample of 97 MSME actors. Source: Data Processed (2022)
The sample technique in this research is purposive sampling
with certain criteria. The data analysis method used is the Furthermore, the simultaneous testing of all independent
multiple regression analysis method which is carried out using variables (financial literacy, age, education, length of business,
SPSS analysis software. gender and income) on investment decisions can be seen in
table 4.3. the following:
The test was conducted on the independent variables
consisting of financial literacy and demographics (age, Table 4.3. Descriptive Statistic
education level, length of business, gender and income level)
as well as investment decisions as the dependent variable. The
testing process is carried out through several stages, namely
validity and reliability tests, regression assumption tests,
hypothesis testing and coefficient of determination tests..

A. Result
Based on table 4.1, it can be seen that all the variables Source: Data Processed (2022)
used in this study have a standard deviation value that is smaller
than the mean value, so it can be concluded that the data Based on table 4.3. it can be seen that the simultaneous
variation of each variable is almost the same. test of the independent variable on the dependent variable has
a p-value of 0.000 which means that the value is smaller than
Table 4.1. Descriptive Statistic the 5% alpha value. Meanwhile, the acquisition value of
Fcount is 74,343, where this value is greater than the Fcount
value of 2.199. Based on this, it can be concluded that the
variables of financial literacy, age, level of education, length
of business, gender and level of income simultaneously have a
positive and significant influence on investment decisions.

Furthermore, the coefficient of determination (R2) is a

coefficient used to determine the level of suitability or accuracy
Source: Data Processed (2022) of a value/regression line with the amount of data in the
research sample. The coefficient of determination is the ability
Based on table 4.1 it can be seen that all the variables used of the independent variable in influencing changes in the
in this study have a standard deviation value that is smaller than dependent variable, where this ability is seen from the
the mean value, so it can be concluded that the variation in the magnitude of the coefficient of determination. The higher the
data for each of these variables is almost the same. coefficient of determination, the better the ability of the
independent variable to influence the dependent variable. The
Partial hypothesis testing can be seen in the following magnitude of the coefficient of determination in this study can
coefficient table:. be seen in table 4.4.

On the table 4.2, it can be seen that at the 5% significance Table 4.4. Anova
level there are four variables that influence investment
decisions, namely financial literacy, level of education, length
of business and level of income. The four variables have a p
value that is smaller than the alpha value of 5%. This means
that changes in the four variables can cause changes in
investment decisions. Meanwhile, age and gender variables
Source: Data Processed (2022)
were found to be unable to influence investment decisions with
a p value greater than 5% alpha value. This means that age and
Table 4.4. shows that the coefficient of determination (R2)
gender cannot determine changes in investment decisions.
is 0.832. This means that the influence of the independent
variables consisting of financial literacy, age, level of
education, gender and level of income on the dependent

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Volume 7, Issue 12, December – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
variable of investment decisions is 0.832 or 83.2%. Meanwhile, The results of this study support the research conducted
0.168 or 16.8% is influenced by other variables outside the by Witra & Subriadi (2021) who found that the level of
model in this study. education greatly influences the board of directors in
determining the desired investment path. This means that a
B. Discussion person's ability to analyze every investment opportunity and
risk is largely determined by his knowledge of it.
 Financial Literacy and Investment Decision
The results showed that the financial literacy variable had  Demographics (Length of Business) and Investment
a positive and significant effect on investment decisions. This Decision
means that increasing financial literacy can improve The results of the study indicate that the length of
investment decisions. People with a good level of knowledge business variable affects the investment decisions of MSME
about financial literacy tend to choose the type of investment actors. This means that a good investment decision will be
in financial institutions in the form of banks and non-banks. largely determined by the length of time or not the type of
business engaged in by MSME actors. The longer the MSME
The results of this study indicate that the community of actors are in their work or business, the better the investment
MSME actors around the coast of Gorontalo City has a fairly decisions that will be made will also be.
good level of knowledge about financial literacy. The average
MSME actors in the Coastal City of Gorontalo know and The length of the effort determines the level of readiness
understand how to manage finances properly and correctly. of MSME actors in facing the risks that will be faced. So that
People prefer to invest in financial institutions. The financial the investment decisions that will be taken will also be better.
institutions of choice for MSMEs as a place for investment are The results of this study are different from research conducted
dominated by financial institutions in the form of banks. by Ikeobi & Arinze (2016) which states that experience or
Meanwhile, the investment product chosen was dominant in length of business cannot influence investment decisions.
bank products in the form of savings deposits.
 Demographics (Gender) and Investment Decision
The results of this study are in line with research The results showed that the variable gender or gender can
conducted by Al-Tamimi & Kalli (2009) which states that not affect investment decisions. This means that in making
financial literacy can influence investment decisions. This investment decisions it is not necessary to pay attention to
means that the higher a person's knowledge about financial gender. Men are no better than women when it comes to
literacy, then it can improve investment decisions. making investment decisions. On the other hand, women are
not better than men in terms of investment decisions.
 Demographics (Age) and Investment Decision
The results showed that the age variable had no effect on The selection of an investment product is not determined
investment decisions. Any age level will not affect investment by the gender of male or female. Both types of gender have the
decisions. This means that adult or adolescent age does not same opportunities and risks in investing. The results of this
affect a person in determining his investment decision. That is, study support research conducted by Ikeobi & Arinze (2016)
the more mature a person does not guarantee that the person which states that gender or gender differences cannot
has good investment decisions. influence investment decisions.

The results of this study are in line with research The phenomenon of MSME actors in the Coastal City of
conducted by Ikeobi & Arinze (2016) which shows that there Gorontalo does not show any significant differences between
is no significant effect of the age variable on investment men and women in the ownership of investment products in
decisions. Furthermore, the results of this study mean that age financial institutions. This is evidenced by the absence of one
does not guarantee that a person's way of thinking is better in gender domination in terms of ownership of investment
determining the type of investment desired. MSME actors in products of financial institutions, both in banks and non-banks.
the Coastal City of Gorontalo rely heavily on information and
knowledge related to an investment before deciding on the  Demographics (Level of Income) and Investment Decision
place and investment product to choose. The results of this study indicate that the income level of
MSME actors in the Coastal City of Gorontalo affects
 Demographics (Level of Education) and Investment investment decisions positively and significantly. This means
Decision that the amount of funds generated from the type of business
This study shows that the education level variable has a of MSME actors becomes a benchmark for increasing or not
positive and significant effect on investment decisions. This making investment decisions in financial institutions.
means that the higher the education level of MSME actors in
the Coastal City of Gorontalo, the better investment decisions This increase in investment decisions is seen from the
will be made. The results of this study indicate that a person's increase or not the amount of funds or types of investment
ability to decide which type of investment product to choose products that are in demand and selected. The higher the level
is largely determined by the level of education. A high level of of income you have, the more and more varied the number of
education indicates the level of knowledge of MSME actors investments or types of investment products to choose.
about the benefits that will be obtained in investment and how
much risk they must face if the investment fails.

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Volume 7, Issue 12, December – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
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There needs to be attention from the government and

related parties so that they can provide more in-depth
education about investment practices in financial institutions,
both banks and non-bank financial institutions.

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