DOI: 10.26650/jecs2026-1711850 ISSN: 2645-8772

Analyzing the Digitalization Prospects in the Financial Sector of MSMEs and Their Readiness Based on the MSME’s Characteristics and the Educational Attainment of Owners

Irena Pramono, Lasmanah Lasmanah, Farah Aida Nadzri, Mohamad Hanif Hassan, Akbari Indra Basuki
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This study investigates the influence of individual and organizational characteristics on the adoption of financial technology among Indonesian micro, small, and medium enterprises (MSMEs). Despite the growing availability of financial technology, Bank Indonesia reports that only 30-40% of MSMEs use formal financial services. This highlights a gap between the availability of technology and its actual use among MSMEs. This research examines MSMEs’ use of technology and investigates the impact of educational attainment and specific features, particularly size, on their preparedness to adopt it. Using PLS-SEM with SmartPLS4, this study analyses how the owner’s education level and the MSME’s size influence the MSME’s readiness to adopt financial technology. The findings indicate that marketing and customer payments are the primary areas of technology use, while adoption in accounting and financial recordkeeping remains limited. Simultaneously, optimism and innovation are adversely affected by firm characteristics; specifically, larger firm sizes correlate with greater pessimism and a greater reluctance among MSMEs to adopt technology in the financial sector. Moreover, insecurity is significantly correlated with business characteristics, indicating that larger MSMEs experience heightened uncertainty about technology adoption in the financial sector. This outcome signifies that the shift to digital financialization is a big, and challenging for them.

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