The Role of Digital Financial Services on Indian MSMEs
DOI:
https://doi.org/10.17010/ijf/2023/v17i2/170125Keywords:
Digital Financial Services
, Indian MSMEs, Demographic Variables, Mobile PaymentsJELClassification Codes
, G2, G5, G40, G53, L29, O33Paper Submission Date
, June 14, 2022, Paper sent back for Revision, January 22, 2023, Paper Acceptance Date, January 30, Paper Published Online, February 15, 2023Abstract
Purpose : This paper aimed to examine the role of digital financial services on registered micro, small, and medium enterprises in India. This study examined the MSME knowledge, usage, and preferences about several digital financial technologies. Further, the paper discussed the impact of demographic variables on DFS adoption.
Methodology : Primary data were gathered for the study. The questionnaire had three parts. The first part covered demographic variables. The second part identified questions related to DFS awareness and the reason for adopting DFS. The last part covered DFS adoption in various financial activities.
Findings : DFS awareness in the MSME sector was high but far from the required level. Demonetization and COVID-19 also increased the awareness of DFS in the Indian MSME sector. The DFS adoption was found to be affected by the age and experience of the owner/manager. Also, the educational level of the owner/manager did not always impact the DFS adoption.
Practical Implications : Digital financial service providers should increase customer satisfaction and reduce administrative expenses by making their website or application user-friendly to attract MSMEs. Additional government support is essential to enhance DFS awareness among MSMEs.
Originality/Value : This study added to the limited existing literature on MSMEs and their knowledge of digital payments.
Downloads
Published
How to Cite
Issue
Section
References
Agur, I., Peria, S. M., & Rochon, C. (2020). Digital financial services and the pandemic: Opportunities and risks for emerging and developing economies. International Monetary Fund Special Series on COVID-19, Transactions, 1, https://www.imf.org/~/media/Files/Publications/covid19-special-notes/en-special-series-on-covid-19-digital-financial-services-and-the pandemic.ashx?la=en&utm_medium=email&utm_source=govdelivery
Agyapong, D. (2010). Micro, small and medium enterprises' activities, income level and poverty reduction in Ghana – A synthesis of related literature. International Journal of Business and Management, 5(12), 196–205. https://doi.org/10.5539/ijbm.v5n12p196
Anggadwita, G., Luturlean, B. S., Ramadani, V., & Ratten, V. (2017). Socio-cultural environments and emerging economy entrepreneurship: Women entrepreneurs in Indonesia. Journal of Entrepreneurship in Emerging Economies, 9(1), 85–96. https://doi.org/10.1108/JEEE-03-2016-0011
Ayyagari, M., Demirgüç-Kunt, A., & Maksimovic, V. (2011). Small vs. young firms across the world: Contribution to employment, job creation, and growth. https://ssrn.com/abstract=1807732
Baker, H. K., Kumar, S., & Singh, H. P. (2018). Behavioural biases among SME owners. International Journal of Management Practice, 11(3), 259–283. https://doi.org/10.1504/IJMP.2018.092867
Banik, A. (2013). From adoption to innovation: The dynamics of Indian knowledge firms' technology learning. Available at SSRN. https://ssrn.com/abstract=2271102
Basri, S., & Shetty, D. (2018). Predicting E-banking adoption: An evaluation of perception and behavioural intentions of small and medium enterprises in Karnataka. Indian Journal of Finance, 12(7), 28–41. https://doi.org/10.17010/ijf/2018/v12i7/129969
Belitz, H., & Lejpras, A. (2016). Financing patterns of R&D in small and medium-sized enterprises and the perception of innovation barriers in Germany. Science and Public Policy, 43(2), 245–261. https://doi.org/10.1093/scipol/scv027
Bharati, P., & Chaudhury, A. (2012). Technology assimilation across the value chain: An empirical study of small and medium-sized enterprises. Information Resources Management Journal (IRMJ), 25(1), 38–60. https://doi.org/10.4018/irmj.2012010103
Chege, S. M., & Wang, D. (2020). Information technology innovation and its impact on job creation by SMEs in developing countries: An analysis of the literature review. Technology Analysis & Strategic Management, 32(3), 256–271. https://doi.org/10.1080/09537325.2019.1651263
Claudia, O., & Mihaela, H. (2020). Digital transformation of Centru region – Romania. Needs assessment. Studies in Business and Economics, 15(2), 270–281. https://doi.org/10.2478/sbe-2020-0040
Dabić, M., Maley, J., Dana, L.-P., Novak, I., Pellegrini, M. M., & Caputo, A. (2020). Pathways of SME internationalization: A bibliometric and systematic review. Small Business Economics, 55, 705–725. https://doi.org/10.1007/s11187-019-00181-6
Daniel, B. K., & Harland, T. (2017). Higher education research methodology: A step-by-step guide to the research process (1st ed.). Routledge. https://doi.org/10.4324/9781315149783
Dar, I. A., & Mishra, M. (2021). Human capital and SMEs internationalization: Development and validation of a measurement scale. Global Business Review, 22(3), 718–734. https://doi.org/10.1177/0972150918817390
De la Torre, A., PerÃa, M. S., & Schmukler, S. L. (2010). Bank involvement with SMEs: Beyond relationship lending. Journal of Banking & Finance, 34(9), 2280–2293. https://doi.org/10.1016/j.jbankfin.2010.02.014
Ernst & Young. (2019). EY global FinTech Adoption Index, 2019. https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/banking-and-capital-markets/ey-global-fintech-adoption-index.pdf
Gerschewski, S., Evers, N., Nguyen, A. T., & Froese, F. J. (2020). Trade shows and SME internationalisation: Networking for performance. Management International Review, 60, 573–595. https://doi.org/10.1007/s11575-020-00421-0079
Global Partnership for Financial Inclusion. (2020). Promoting digital and innovative SME financing. World Bank Group. https://www.gpfi.org/sites/gpfi/files/saudi_digitalSME.pdf
Gupta, H., & Barua, M. K. (2016). Identifying enablers of technological innovation for Indian MSMEs using best–worst multi criteria decision making method. Technological Forecasting and Social Change, 107, 69–79. https://doi.org/10.1016/j.techfore.2016.03.028
Hakeem, M. M. (2019). Innovative solutions to tap “Micro, Small and Medium Enterprises†(MSME) market: A way forward for Islamic banks. Islamic Economic Studies, 27(1), 38–52. https://doi.org/10.1108/IES-05-2019-0002
Hally, L. (2016). FinTech solutions for small businesses. In, S. Chishti & J. Barberis (eds.), The fintech book: The financial technology handbook for investors, entrepreneurs and visionaries. Wiley. https://doi.org/10.1002/9781119218906.ch32
Hari Krishna, B., & Arun Kumar, A. (2020). FinTech, BigTech and banks: Digitalisation and its impact on banking business models. Indian Journal of Finance, 14(5–7), 76–79. https://doi.org/10.17010/ijf/2020/v14i5-7/153326
Hassan, M., & Meraj, Q. F. (2019). Digital financial services: Initiatives and progress with reference to banking industry: Evidence from India. https://dx.doi.org/10.2139/ssrn.3319894
Ilori, A. B., Lawal, A., & Simeon-Oke, O. O. (2017). Innovations and innovation capability in palm kernel processing industry in Southwestern Nigeria. International Journal of Innovation Science, 9(1), 102–114. https://doi.org/10.1108/IJIS-10-2016-0045
Indrawati, H., Caska, & Suarman. (2020). Barriers to technological innovations of SMEs: How to solve them? International Journal of Innovation Science, 12(5), 545–564. https://doi.org/10.1108/IJIS-04-2020-0049
Kaka, N., Madgavkar, A., Kshirsagar, A., Gupta, R., Manyika, J., Bahl, K., & Gupta, S. (2019). Digital India: Technology to transform a connected nation. McKinsey Global Institute. https://www.mckinsey.com/mckinsey-digital/our-insights/digital-india-technology-to-transform-a-connected-nation
Kotishwar, A. (2018). Impact of digitalization on select banks. Indian Journal of Finance, 12(12), 32–51. https://doi.org/10.17010/ijf/2018/v12i12/139890
Kraus, S., Rigtering, J. P., Hughes, M., & Hosman, V. (2012). Entrepreneurial orientation and the business performance of SMEs: A quantitative study from the Netherlands. Review of Managerial Science, 6, 161–182. https://doi.org/10.1007/s11846-011-0062-9
Lyons, A. C., & Kass-Hanna, J. (2020). Rebuilding the livelihoods of forcibly displaced populations using digital financial inclusion. T20 Saudi Arabia Policy Brief. https://www.g20-insights.org/wp-content/uploads/2020/11/T20_TF6_PB7.pdf
Malkawi, M. S., & Rumman, A. A. (2016). Knowledge management capabilities and its impact on product innovation in SME's. International Business Research, 9(5), 76–85. https://doi.org/10.5539/ibr.v9n5p76
Ministry of Micro, Small and Medium Enterprises. (2021). Annual report 2020–21. https://msme.gov.in/sites/default/files/MSMEENGLISHANNUALREPORT2021-22.pdf
Mohania, S., & Mainrai, G. (2020). The COVID-19 pandemic and its impact on the banking industry – A case of national bank Ltd. Indian Journal of Finance, 14(8–9), 80–89. https://doi.org/10.17010/ijf/2020/v14i8-9/154950
Motwani, D., Shrimali, D., & Agarwal, K. (2014). Customer's attitude towards social media marketing. SSRN Electronic Journal. https://ssrn.com/abstract=2438187
Nanda, T., Gupta, H., Singh, T. P., Kusi-Sarpong, S., Jabbour, C. J., & Cherri, A. (2020). An original framework for strategic technology development of small manufacturing enterprises in emerging economies. Benchmarking: An International Journal, 27(2), 781-816. https://doi.org/10.1108/BIJ-02-2019-0074
Navena Nesa Kumari, J., Joe Arun, C., & Irudaya Veni Mary, A. (2021). Mobile payment technology adoption in SME owners in India – An empirical study. Indian Journal of Finance, 15(1), 36–54. https://doi.org/10.17010/ijf/2021/v15i1/157013
Nemoto, N., & Yoshino, N. (2019). Fintech for Asian SMEs. Asian Development Bank Institute. http://hdl.handle.net/11540/10203
NPCI. (n.d.). UPI product statistics. https://www.npci.org.in/what-we-do/upi/product-statistics
Ogubazghi, S. K., & Muturi, W. (2014). The effect of age and educational level of owner/managers on SMMEs' access to bank loan in Eritrea: Evidence from Asmara City. American Journal of Industrial and Business Management, 4(11), 632–643. http://doi.org/10.4236/ajibm.2014.411069
Okręglicka, M., Gorzeń-Mitka, I., & Ogrean, C. (2015). Management challenges in the context of a complex view-SMEs perspective. Procedia Economics and Finance, 34, 445–452. https://doi.org/10.1016/S2212-5671(15)01653-6
Padachi, K., Narrainen, D., & Boolaky, A. (2018). Prototyping an innovative e-platform of financial assistance for small medium enterprises in Mauritius. African Journal of Business Management, 12(13), 415–427. https://doi.org/10.5897/AJBM2018.8572
Pazarbasioglu, C., Mora, A. G., Uttamchandani, M., Natarajan, H., Feyen, E., & Saal, M. (2020). Digital financial services. World Bank. https://pubdocs.worldbank.org/en/230281588169110691/Digital-Financial-Services.pdf
Priyanath, H. M., & Premaratne, S. P. (2015). Government SME development programs in Sri Lanka: A review in the lens of transaction cost economics. Sabaragamuwa University Journal, 13(2), 59–81. http://doi.org/10.4038/suslj.v13i2.7681
PWC. (2014). Future of India: The winning leap. https://www.pwc.com/sg/en/publications/assets/future-of-india-the-winning-leap.pdf
Rasheed, R., & Siddiqui, S. H. (2019). Attitude for inclusive finance: Influence of owner-managers' and firms' characteristics on SMEs financial decision making. Journal of Economic and Administrative Sciences, 35(3), 158–171. https://doi.org/10.1108/JEAS-05-2018-0057
Rekha, I. S., Basri, S., & Kavitha, T. C. (2020). Acceptance of internet banking: Comparing six theoretical models. Indian Journal of Finance, 14(3), 7–21. https://doi.org/10.17010/ijf/2020/v14i3/151073
Rogers, E. M., Singhal, A., & Quinlan, M. M. (2014). Diffusion of innovations. In, An integrated approach to communication theory and research (pp. 432–448). Routledge.
Saifurrahman, A., & Kassim, S. (2022). Collateral imposition and financial inclusion: A case study among Islamic banks and MSMEs in Indonesia. Islamic Economic Studies, 30(1), 42–63. https://doi.org/10.1108/IES-04-2022-0023
Setiawan, B., Nugraha, D. P., Irawan, A., Nathan, R. J., & Zoltan, Z. (2021). User innovativeness and fintech adoption in Indonesia. Journal of Open Innovation: Technology, Market, and Complexity, 7(3), 188. https://doi.org/10.3390/joitmc7030188
Shang, Q., Ma, Z., & Wang, X. (2020). In search of the best interest rate for group lending: Toward a win–win solution for SMEs and commercial banks in China. The Chinese Economy, 53(3), 285–299. https://doi.org/10.1080/10971475.2020.1722359
Shinozaki, S., & Rao, L. N. (2021). COVID-19 impact on micro, small, and medium-sized enterprises under the lockdown: Evidence from a rapid survey in the Philippines (ADBI Working Paper Series No. 1216). https://www.adb.org/sites/default/files/publication/677321/adbi-wp1216.pdf
Sim, S. S., Yip, M. Y., Wang, Z., Tan, A. C., Tan, G. S., Cheung, C. M., Chakravarthy, U. M., Wong, T. Y., Teo, K. Y., & Ting, D. S. (2021). Digital technology for AMD management in the post-COVID-19 new normal. Asia-Pacific Journal of Ophthalmology, 10(1), 39–48. http://doi.org/10.1097/APO.0000000000000363
Singh, S., & Srivastava, R. K. (2018). Predicting the intention to use mobile banking in India. International Journal of Bank Marketing, 36(2), 357–378. https://doi.org/10.1108/IJBM-12-2016-Ɔ
Streijl, R. C., Winkler, S., & Hands, D. S. (2016). Mean opinion score (MOS) revisited: Methods and applications, limitations and alternatives. Multimedia Systems, 22, 213–227. https://doi.org/10.1007/s00530-014-0446-1
Terjesen, S., Hessels, J., & Li, D. (2016). Comparative international entrepreneurship: A review and research agenda. Journal of Management, 42(1), 299–344. https://doi.org/10.1177/0149206313486259
Thakur, R., & Srivastava, M. (2014). Adoption readiness, personal innovativeness, perceived risk and usage intention across customer groups for mobile payment services in India. Internet Research, 24(3), 362–392. https://doi.org/10.1108/IntR-12-2012-0244
Tomar, J. S. (2017). State of IT adoption in SMEs in India. Prabandhan: Indian Journal of Management, 10(1), 40–53. https://doi.org/10.17010/pijom/2017/v10i1/109102
