Asian Development Review· 2026Q2
How Financial Digitalization Affects Business Performance and Business Innovation in Ultra-Micro, Micro, and Small Enterprises: Evidence from Indonesia
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- Q2SCImago
- 2026year
Short summary
Financial digitalization significantly improves business performance and innovation in Indonesian ultra-micro, micro, and small enterprises (UMSEs), according to a 2023 survey of over 5,000 firms.
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Key points
- Financial digitalization enhances business performance in Indonesian UMSEs.
- Financial digitalization also drives business innovation in Indonesian UMSEs.
- The study used data from Bank Indonesia's 2023 UMSE digital adoption survey (>5,000 enterprises).
- Causality was established using the inverse probability weighting regression adjustment (IPWRA) method.
- Key challenges include digital financial literacy, infrastructure, and regulations.
AI-generated from the title and abstract; the full text is not read.
Abstract
The COVID-19 pandemic and the associated mobility restrictions forced many ultra-micro, micro, and small enterprises (UMSEs) to move online and utilize digital finance to survive and thrive. We investigate the impact of the financial digitalization of UMSEs on their business performance and business innovation using data from Bank Indonesia’s UMSE digital adoption survey of 2023, which covered more than 5,000 enterprises in Indonesia. To identify causality, we employ the inverse probability weighting regression adjustment (IPWRA) method. The findings indicate that financial digitalization improves UMSE business performance and business innovation, thus confirming the significant role of technology-driven innovation in financial services in the development of small businesses. However, several key challenges first need to be addressed, particularly digital financial literacy, integrated infrastructure, and regulations. Therefore, policy actions to accelerate UMSEs' digital transformation are needed to help them achieve high productivity, long-term growth, and global competitiveness.
The authors' abstract, as published at the source. Asian Development Review, 2026 · DOI ↗
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Management Information SystemsBusiness, Management and Accounting