Government Policy and Digital Financial Literacy as Drivers of Digital Financial Inclusion: Evidence from Gen Z MSMEs in East Java, Indonesia
Nabiilah Indah Nur Rahiimah *
Department of Accounting, Faculty of Economics, Universitas Islam Maulana Malik Ibrahim Malang, Indonesia.
Sri Andriani
Department of Accounting, Faculty of Economics, Universitas Islam Maulana Malik Ibrahim Malang, Indonesia.
*Author to whom correspondence should be addressed.
Abstract
Aims: This study aims to analyze the influence of government policy and digital financial literacy, both partially and simultaneously, on digital financial inclusion among Generation Z Micro, Small, and Medium Enterprises (MSMEs) actors in East Java.
Study Design: This study uses a quantitative method with a descriptive framework to examine hypotheses and clarify the cause-and-effect links among different factors.
Place and Duration of Study: The research was conducted in East Java Province, Indonesia, concentrating on small and medium-sized enterprises operated by Generation Z. Data collection was collected from September to November 2025.
Methodology: The group under consideration consists of all Gen Z MSMEs participants in East Java, creating an unbounded population. A total of 385 participants was identified using the Cochran formula and chosen through purposive sampling (requirements: aged between 18 and 28, residing in East Java, and utilizing digital financial services). Information was gathered through an online survey employing a 5-point Likert scale. The analysis of the data was conducted using Structural Equation Modeling grounded in Partial Least Square (PLS-SEM) with the aid of SmartPLS software, assessing both the measurement model (outer model) and the structural model (inner model).
Results: The results indicate that Government Policy has a beneficial effect on Digital Financial Inclusion. Additionally, Digital Financial Literacy plays a crucial role in enhancing inclusion, showing a greater influence than policy initiatives by themselves. At the same time, both elements both factors effectively drive digital financial inclusion, accounting for a moderate portion of the variance (Adjusted R-Square = 0.246)
Conclusion: The research supports the fundamental idea of Human Capital Theory, establishing that even though government policies create the essential framework, the real catalyst for inclusion is 'human capital' represented by digital financial literacy. These results fill an important void in comprehending the actions of young entrepreneurs and suggest that those in charge of policy should redirect their attention from methods reliant on infrastructure to strategies that enhance skills, promoting a lasting digital economy.
Keywords: Digital financial inclusion, digital financial literacy, government policy, MSMEs, generation Z