The Role of Digital Financial Services on the Performance of MSMES in Indonesia using the Toe Model

Abstract

Micro, small, and medium enterprises (MSMEs) play an important role in the global economy. A dynamic business environment triggers increasingly fierce competition among MSMEs, requiring owners to actively interact with their internal and external environments. This study utilizes the Technological, Organizational, and Environmental (TOE) characteristics framework to examine the impact of digital financial services (DFS) on MSMEs performances in Indonesia. Empirical investigation is conducted using a closed-ended questionnaire. Data was collected from August 2022 to October 2022, with MSMEs players in Indonesia serving as respondents. Employing quantitative methods, we analyzed 200 responses through structural equation modeling. The findings indicate that the TOE framework has a positive effect on DFS adoption, DFS adoption has a positive effect on MSMEs performances, and DFS adoption mediates the impact of the TOE framework on MSMEs performances. The practical implication of this study is that, in the current digital era, MSMEs should prioritize the implementation of DFS to enhance and maintain their performance.