Sharia-Based Business Management and Digital Innovation for Sustainable MSME Development in Indonesia

Abstract

Background: Micro, Small, and Medium Enterprises (MSMEs) constitute the backbone of Indonesia’s economy, accounting for more than 97% of total business units and absorbing over 96% of the national workforce. Despite their pivotal economic role, MSMEs continue to face structural challenges including limited access to sharia-compliant financing, low financial literacy, inadequate managerial capacity, and slow adoption of digital technologies. The integration of sharia-based management principles with digital innovation has emerged as a strategic framework for addressing these constraints.

Objective: This study examines the influence of sharia-based business management and digital innovation on sustainable MSME development in Indonesia, and explores the synergistic mechanisms through which Islamic principles and technological transformation contribute to MSME performance and resilience.

Methods: A systematic literature review methodology was employed, drawing on 29 peer-reviewed Indonesian and international journal articles published between 2019 and 2026. Data were synthesized thematically and supported by quantitative indicators derived from secondary MSME statistics.

Results: Findings reveal that sharia management principles—encompassing amanah (trustworthiness), adl (justice), and maslahah (public interest)—significantly enhance operational ethics, stakeholder trust, and long-term viability. Digital transformation through fintech syariah, e-commerce halal platforms, and digital financial management further amplifies competitive advantage. A composite scoring model indicates that MSMEs integrating both sharia management and digital innovation demonstrate up to 43% higher sustainability indices compared to conventionally managed peers.

Conclusion: The convergence of sharia principles and digital innovation constitutes a viable and robust pathway for sustainable MSME development, with implications for policymakers, Islamic financial institutions, and MSME practitioners in Indonesia.