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Digital Adoption, Business Performance, And Financial Literacy In Ultra-Micro, Micro, And Small Enterprises In Indonesia

Author

Listed:
  • Yoga Affandi

    (Bank Indonesia)

  • Masagus M. Ridhwan

    (Bank Indonesia)

  • Irwan Trinugroho

    (Universitas Sebelas Maret)

  • Danny Hermawan

    (Bank Indonesia)

Abstract

This study investigates the factors affecting digital adoption by ultra-micro, micro, and small enterprises (UMSEs) based on a survey of 5,035 UMSEs in 17 major provinces in Indonesia. Utilizing the survey data, we also construct a digital adoption index that can be used to evaluate the regional adoption level variations. The result shows that several factors notably owner demographic characteristics, firm-specific factors, business environment, connectivity infrastructure quality, and culture are associated with the disparity in digital adoption by UMSEs. Our finding also shows a positive and significant correlation between digital adoption on business performance (sales growth). We further found strong evidence of the impact of digital adoption on the level of financial literacy of UMSEs’ owners. The latter result suggests that improving digital adoption among micro businesses (UMSEs) could be a lever to enhance their financial literacy. All in all, these findings suggest the vital role of digital transformation for micro-businesses in achieving growth and competitiveness in the global market, undoubtedly requiring robust support from policymakers.

Suggested Citation

  • Yoga Affandi & Masagus M. Ridhwan & Irwan Trinugroho & Danny Hermawan, 2023. "Digital Adoption, Business Performance, And Financial Literacy In Ultra-Micro, Micro, And Small Enterprises In Indonesia," Working Papers WP/13/2023, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp132023
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    Cited by:

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    2. Yang, Jinglan & Liu, Jianghuai & Yao, Zheng & Ma, Chaoqun, 2024. "Measuring digitalization capabilities using machine learning," Research in International Business and Finance, Elsevier, vol. 70(PB).

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    More about this item

    Keywords

    Digital Adoption; Ultra-Micro; Micro and Small Enterprises; Firm Performance; Financial Literacy.;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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