Public Policy Strategies for MSME Digital Transformation: Promoting Sustainable Economic Growth and Reducing Inequalities in Surakarta, Indonesia

Abstract

This study examines how public policy strategies support MSME digital transformation and how these strategies contribute to sustainable local economic growth and reduced inequalities in Surakarta, Indonesia. The study responds to concerns that digitalisation can widen inequalities when MSMEs differ in capital, digital skills, managerial capability, infrastructure access, and market opportunities. Using a qualitative descriptive design, data were collected through in-depth interviews, field observations, and document analysis involving 20 informants: 11 MSME owners, five local government officials, and four digital ecosystem stakeholders. The findings show that digital transformation among MSMEs occurs along a continuum, from basic communication-oriented adoption to integrated digital business practices involving marketplaces, digital payments, stock monitoring, and online promotion. Local government support has encouraged formalisation, digital literacy, QRIS adoption, marketplace participation, product certification, and collaboration with banks, universities, platforms, and MSME communities. However, elderly-owned businesses, traditional micro-enterprises, women-led home businesses, and peripheral MSMEs remain vulnerable because they face limited skills, unstable internet access, high platform costs, weak digital security capacity, and limited follow-up mentoring. The study proposes an integrated policy strategy connecting digital capacity strengthening, infrastructure and platform access, financial and institutional support, regulatory facilitation and data governance, and multi-stakeholder collaboration. The study argues that inclusive digital transformation should be measured not only by the number of MSMEs using digital tools, but also by sustained use, improved productivity, safer transactions, wider market access, and reduced capability gaps.