DIGITAL ADOPTION, BUSINESS PERFORMANCE, AND FINANCIAL LITERACY IN ULTRA-MICRO, MICRO, AND SMALL ENTERPRISES IN INDONESIA

Yoga Affandi, Masagus M Ridhwan, Irwan Trinugroho and Danny Hermawan
Additional contact information
Yoga Affandi: Bank Indonesia
Irwan Trinugroho: Universitas Sebelas Maret
Danny Hermawan: Bank Indonesia

No WP/13/2023, Working Papers from 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.

Keywords: Digital Adoption; Ultra-Micro; Micro and Small Enterprises; Firm Performance; Financial Literacy. (search for similar items in EconPapers)
JEL-codes: L25 O33 R11 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2023
New Economics Papers: this item is included in nep-ent, nep-fle, nep-pay, nep-sbm and nep-sea
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http://publication-bi.org/repec/idn/wpaper/WP132023.pdf First version, 2023 (application/pdf)

Related works:
Journal Article: Digital adoption, business performance, and financial literacy in ultra-micro, micro, and small enterprises in Indonesia (2024)
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