ENHANCING SUSTAINABLE MSMES THROUGH REGIONAL FINANCIAL INSTITUTIONS: THE MODERATING INFLUENCE OF DIGITAL FINANCIAL PRODUCTS: English

Abstract

While access to regional financial institutions is important in supporting MSMEs in their sustainability, challenges are still evident with regard to the utilization of financial access to support digital transformation. This paper, therefore, seeks to establish the effect of access to regional financial institutions on MSMEs' sustainability and the moderating role of digital financial products on this relationship. Therefore, the quantitative approach using Partial Least Squares-Structural Equation Modeling (PLS-SEM) was employed to analyze the relationship between variables. Data collection was done by surveying 200 owners or managers of MSMEs in Denpasar, Bali. The selection criteria for respondents are those MSMEs that have accessed or attempted to access credit and have financial management knowledge. The results show that access to regional financial institutions positively influences the sustainability of MSMEs. In addition, the digital financial products significantly enhance such a relationship, implying that the financial digitization increases the effectiveness of financial access for MSMEs. The study hereby offers important lessons to policymakers, financial institutions, and MSME actors in the pursuit of designing digital-based financial access strategies toward business sustainability