DIGITALIZATION OF MSMEs, FINTECH ACCESS, AND DIGITAL LITERACY IN STRENGTHENING THE REGIONAL ECONOMY IN INDONESIA

Abstract

This research examines the interrelationship among MSME (Micro, Small, and Medium Enterprises) digitalization, fintech (financial technology) access, and digital literacy as pivotal enablers for strengthening regional economic resilience in Indonesia. Employing a mixed-methods approach combining structural equation modeling (SEM) on a sample of 385 MSME actors across five Indonesian provinces with qualitative interviews the research evaluates how digital adoption translates into measurable economic outcomes at the regional level. Findings reveal that digital literacy significantly mediates the relationship between fintech access and MSME performance (β = 0.487, p < 0.001), while infrastructure readiness moderates the digitalization-performance nexus. Regions with higher digital literacy indices demonstrate 32.4% greater MSME revenue growth compared to low-literacy regions. The research contributes a new Regional Digital Economy Strengthening (RDES) framework and provides evidence-based policy recommendations for Indonesian provincial governments and the Financial Services Authority (OJK). Implications extend to other developing economies facing similar structural digital divides