Achmad Murdiono, Heri Pratikto, Puji Handayati, Agung Winarno, Subagyo, Fadia Zen
Understanding the financial literacy of Micro, Small, and Medium Enterprises (MSMEs) can help the sector survive and thrive. This study attempts to classify financial literacy among MSMEs using unsupervised clustering and to identify variability in the degree of financial literacy. Data on the financial literacy of MSMEs were collected via a structured assessment survey covering four components of financial literacy: general financial knowledge, saving and borrowing, insurance, and investing. Data cleaning and normalization were performed on the responses to the four components, measured on an ordinal scale, to prepare them for analysis. The latent group structure of MSMEs was determined using K-Means and Agglomerative clustering. The clustering performance was evaluated using the Silhouette Score and the Davies-Bouldin Index. K-Means clustering yielded a Silhouette Score of 0.2635 and a Davies-Bouldin Index of 1.3375, both higher than those of Agglomerative clustering. Three clusters were identified: 30.4% of MSMEs fall into the low literacy group, 47.4% into the medium literacy group, and 22.2% into the high literacy group. The high literacy group achieved the best performance on all the components, while the low literacy group struggled to save, borrow, and invest. The medium cluster comprised diverse behaviors, so it is a medium group with a significant likelihood of greater financial literacy. The evidence emphasizes the importance of customized approaches to improving financial education and modifying employment policies in line with the Sustainable Development Goals (SDGs) within the scope of economic empowerment and financial inclusion. Future studies may propose a model for segmentation and adaptive literacy interventions that encompasses demographic, psychosocial, and longitudinal elements to address the varied contexts of MSMEs. © 2026, Politeknik Negeri Padang. All rights reserved.
Department of Management, Faculty of Economics and Business, Universitas Negeri Malang, Indonesia; Department of Accounting, Faculty of Economics and Business, Universitas Negeri Malang, Indonesia
