Transforming rural MSMEs through digital governance, legalization, and financial inclusion: evidence from Indonesia

Abstract

Purpose: to analyze the effectiveness of an integrated intervention model in strengthening rural MSME governance through business formalization, digital financial management adoption, and financial inclusion enhancement.

Method: this study used a participatory action research (PAR) approach, employing observation, mentoring, and pre-test–post-test evaluation to assess the impact of business legalization assistance, digital financial management training, and financial literacy programs on the transformation of rural MSMEs.

Findings: the intervention significantly improved MSME governance capacity, digital financial management practices, and formal financing readiness. Participants demonstrated increased compliance with business legalization, improved financial recording capabilities, and a greater understanding of digital tools and formal financing mechanisms. The findings indicate that an integrated approach combining legal formalization, digital transformation, and financial inclusion can strengthen the sustainability and competitiveness of rural MSMEs.

Implications: rural MSME development programs should integrate business formalization, digital financial governance, and financial literacy support to enhance institutional capacity, sustainability, and access to formal economic opportunities.

Originality: lies in developing an integrated rural MSME transformation model that simultaneously combines business legalization, digital financial governance, and financial inclusion support through a participatory mentoring approach.