Analysis of technology adoption and government policy in improving the financial performance of SMEs in the Indonesia agricultural sector

Abstract

Agriculture micro, small, and medium enterprises (MSMEs) have an important function but face problems in improving financial performance, including low net income of agricultural commodities per season, low yields per hectare, and low added value of processed agricultural products. The study aimed to analyze the effects of technology-based acceleration programs, digital literacy, and agricultural technology on financial sector performance in MSMEs within the agricultural sector in South Sumatra Province, Indonesia. The analysis method employed SEM-PLS on survey data collected from 160 respondents proportionally representing 13 regencies and four cities in South Sumatra Province. The independent variables consisted of the intensity of participation in technology-based acceleration programs, including mentoring, training, incubation, agricultural product development, and entrepreneurship. It also included digital literacy, such as mastery of smart agricultural applications, the ability to analyze harvest data and soil quality, and skills in innovating with agricultural technology, as well as government policies, including financing and access to credit, subsidies, and social assistance, training, and capacity building. The dependent variable focused on the improvement in financial performance, which included the level of income from agricultural commodities per season and net profit per season. The results of this study showed that the output of the R-Square SEM-PLS model indicated that participation in technology-based acceleration programs had a significant effect on the financial performance of MSMEs in the agricultural sector. Improving financial performance was also supported by digital literacy, which included applying intelligent agricultural skills, analyzing harvest data and soil quality, and the ability to innovate with digital technology. Technology-based acceleration programs, digital literacy, modern agricultural technology, and government policies collectively contributed to improving financial performance in MSMEs within the agricultural sector.