FROM DIGITAL INCLUSION TO SUSTAINABLE BUSINESS: ANALYZING THE INFLUENCE OF IMDI AND HDI ON MSMES IN INDONESIA

Abstract

Digital inclusion has become a crucial factor in supporting sustainable business growth in the Micro, Small, and Medium Enterprises (MSMEs) sector in Indonesia, especially through improving the quality of human resources and accelerating the adoption of information technology. This study aims to analyze the influence of the Human Development Index (HDI) and the Indonesian Digital Society Index (IMDI) on the MSME Business Index in 38 Provinces in Indonesia during the period 2022-2024. Utilizing panel data from the Central Bureau of Statistics (BPS), ministry of communication and digital (KOMDIGI), and the official website of Bank Rakyat Indonesia. This study adopts a quantitative approach using multiple linear regression, complemented by a series of classical assumption tests and statistical hypothesis validation to ensure the reliability of the model. The empirical findings show that IMDI contributes positively and significantly to the improvement of the MSME Business Index. In contrast, HDI has a significantly negative contribution. However, this opens up opportunities to direct human development to better support inclusive growth of MSMEs. The implications of this study highlight the synergy between human capacity development and digital inclusion as key drivers of economic sustainability based on circular economy principles and resilience of rural areas in Indonesia. This study makes an important contribution to the economic development and public policy literature, particularly in the context of MSME digitalization in developing countries.