Economic and Financial Digitalization on the Financial Performance of MSMEs in the Post-COVID-19 Era (A Case Study in Sumatra and Java Islands) Lucky Satria Pratama (a*), Nasrullah Hidayat (b), Rossy Pratiwi Sihombing (b), Hartato Rianto (b), Shintami Oktavia (b)
a,b) Faculty of Economics, Universitas Negeri Medan, Indonesia
Abstract
This study aims to analyze the impact of economic and financial digitalization on the financial performance of MSMEs, with a focus on provinces in Sumatra and Java Islands. A quantitative approach is employed using the Partial Least Square-Structural Equation Modeling (PLS-SEM) method. The research model tests the direct effects of input variables, output variables, and support variables on MSME financial performance. Data were obtained from secondary sources provided by relevant institutions. The results of the outer model analysis indicate that all indicators are valid and reliable, with loading factor values exceeding 0.7 and composite reliability values above 0.7. The inner model shows that the output variable has a significant influence on MSME financial performance, whereas the input and support variables do not demonstrate significant effects. The R-squared value of 0.712 for MSME financial performance indicates strong predictive capability of the model. These findings suggest the existence of a digital mismatch between the availability of resources and institutional support and the effective adoption of digital technology in MSME operations. The insignificance of the input and support variables implies that the presence of infrastructure and resources alone is not sufficient to drive digital transformation, unless accompanied by proper utilization and alignment with the specific needs of MSME actors. Low levels of digital literacy, unequal distribution of technology, and weak policy interventions at the local level are potential factors explaining this anomaly.
Keywords: Economic Digitalization- MSME Financial Performance- Input and Support Variables- Digital Transformation- Digital Literacy
Topic: Economics, Social and Early childhood Education
