Digitalization and financial inclusion among women-led micro and small enterprises in Indonesia: an empirical perspective

Introduction: This study aims to examine how digitalization and financial inclusion influence the financial performance of women-owned micro, small, and medium enterprises (MSMEs) in Indonesia, as well as to explain the social mechanisms that mediate this relationship. Methods: This study adopts a mixed-methods approach, combining quantitative analysis based on a survey of female MSME owners with qualitative insights derived from in-depth interviews. The quantitative analysis investigates the relationships among digital literacy, financial support, self-development motivation, digital marketing, and financial literacy in relation to business performance, while the qualitative analysis provides a contextual understanding of the social and institutional factors shaping women's entrepreneurial practices. Results: The findings reveal that digitalization and financial support do not directly enhance the financial performance of women-owned MSMEs. Instead, their effects are mediated by self-development motivation, digital marketing, and financial knowledge, attitudes, and behaviors. The results also highlight the existence of a capacity-performance gap, referring to the discrepancy between improvements in individual capacity and actual business performance outcomes. Discussion: The qualitative findings indicate that structural factors, such as asset ownership, access to financial institutions, social networks, and women's dual roles within the household, significantly affect the ability of female entrepreneurs to translate these capacities into tangible economic outcomes. This study contributes to the literature on economic sociology and women's entrepreneurship by demonstrating that entrepreneurial success is shaped by the interaction between individual capabilities and structural conditions influencing economic opportunities, particularly in the informal economy of developing countries.