Contribution of the Banking Sector in Improving the Capability and Competitiveness of Micro, Small, and Medium Enterprises (MSMEs)

Abstract

Objective: This study aims to analyze the banking sector's contribution to enhancing the competitiveness of Micro, Small, and Medium Enterprises (MSMEs) by improving access to financial services, promoting digital payment systems, and strengthening financial literacy. Research Design & Methods: This research uses a qualitative method with literature study to analyze concepts, theories, and policies in depth from various written sources such as books, journals, and other documents. Findings: The results indicate that financial accessibility through banking institutions significantly improves MSMEs' competitiveness by addressing capital constraints and fostering business expansion. The adoption of digital banking services and financial literacy programs further enhances MSMEs' financial management capabilities. However, MSMEs must also improve their financial governance and marketing strategies to align with banking standards. Implications & Recommendations: Policymakers and financial institutions should expand banking services in underserved areas, enhance digital infrastructure, and implement targeted financial education programs for MSMEs owners. Strengthening MSMEs' financial management and aligning it with banking standards can improve their eligibility for financial support. Contribution & Value Added: This study contributes to the existing literature by highlighting the role of banking sector interventions in MSMEs competitiveness, emphasizing the need for a holistic approach that integrates financial accessibility, digitalization, and capacity building.