Tri Warcono

The Impact of Working Capital Management, Capital Structure, and Financial Planning on Micro Business Profitability in MSMEs Receiving the KUR Program in Surabaya City

Introduction

The impact of working capital management, capital structure, and financial planning on micro business profitability in msmes receiving the kur program in surabaya city. Analyze how working capital management, capital structure, and financial planning impact micro business profitability in Surabaya's KUR program. Capital structure is key. Insights for MSMEs & policymakers.

Abstract

This study investigates the impact of working capital management, capital structure, and financial planning on the profitability of micro businesses participating in the Kredit Usaha Rakyat (KUR) program in Surabaya City. Using a quantitative explanatory research design, data were collected from 160 micro business owners who met the criteria of active KUR recipients for at least one year. The research employed Structural Equation Modeling–Partial Least Squares (SEM-PLS) to test the proposed hypotheses. The results show that capital structure has the strongest positive and significant effect on micro business profitability, followed by working capital management and financial planning. Furthermore, the findings reveal that these financial management practices are interrelated, with each construct contributing uniquely to profitability improvement. The study underscores the importance of integrated financial strategies for micro entrepreneurs to enhance operational efficiency, optimize resource allocation, and maintain financial stability. These insights provide valuable implications for policymakers, financial institutions, and business practitioners in designing targeted interventions to strengthen the sustainability and competitiveness of micro enterprises in Indonesia.

Review

This study presents an investigation into the critical factors influencing micro business profitability within a specific context: MSMEs receiving the Kredit Usaha Rakyat (KUR) program in Surabaya City. Utilizing a robust quantitative explanatory design with data from 160 micro business owners, the research employs Structural Equation Modeling–Partial Least Squares (SEM-PLS) to analyze the impact of working capital management, capital structure, and financial planning. The findings, which highlight capital structure as the most significant predictor of profitability, followed by working capital management and financial planning, offer a valuable contribution to understanding financial management dynamics in a vital segment of the Indonesian economy. A significant strength of this research lies in its clear focus on a highly relevant and under-researched demographic – micro businesses within a specific government credit program, which has substantial economic implications. The application of SEM-PLS is appropriate for exploring the interrelationships between the constructs, and the reported findings regarding the unique and interrelated contributions of working capital management, capital structure, and financial planning provide nuanced insights. The study's emphasis on capital structure's primary role offers a particularly compelling finding for micro-enterprises, suggesting that their financing mix is paramount. Furthermore, the practical implications for policymakers, financial institutions, and business practitioners are well-articulated, offering actionable guidance for developing targeted interventions to foster sustainability and competitiveness. While the study provides strong evidence for the relationships examined, the abstract leaves some areas for potential future exploration. A deeper understanding of the *mechanisms* through which capital structure exerts its strongest influence on micro businesses, perhaps distinguishing between debt and equity types available to this specific group, could enhance the theoretical contribution. Additionally, exploring potential moderating or mediating variables, such as entrepreneurial education levels or market competition, could provide a more comprehensive picture. Future research might also consider a qualitative component to delve into the practical challenges and decision-making processes faced by these micro-entrepreneurs, complementing the quantitative findings and further enriching the policy recommendations.

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