Ridwan Widagdo

Type of the article: Research Article

Abstract
This study examines the effect of Shariah-compliant fintech, financial inclusion, Shariah banking governance, and financial literacy on maintaining micro, small, and medium enterprises (MSMEs) in Indonesia. A standardized survey was administered to 157 owners and managers of MSMEs who are current clients of Shariah-compliant banking entities in West Java. Purposive sampling was used to obtain relevance since West Java is among Indonesia’s most dynamic MSME regions with robust Islamic banking penetration. Data were collected from June to September 2024 and analyzed using WarpPLS. This study demonstrates a profound ethical commitment regarding the protection of human subjects and the integrity of the research. The results indicate that financial literacy has the most significant direct impact on the sustainability of MSMEs (β = 0.847, p < 0.001), as it helps entrepreneurs make sound financial decisions and fortifies business endurance. Shariah banking fintech also has a direct significant but minor effect (β = 0.057, p = 0.008), while Shariah banking governance has a positive but also minor effect (β = 0.065, p = 0.005). Notably, financial literacy mediates the role of Shariah fintech and governance towards MSME sustainability in boosting their contribution. Nevertheless, it does not manage financial inclusion, which directly aids sustainability. These results underscore the important relationship between financial literacy and the effectiveness of Sharia-compliant financial services. The study proposes that targeted financial literacy campaigns, advanced fintech, and robust governance frameworks are needed to bolster the resilience of MSMEs and advance Indonesia’s economy.