Click-to-credit: Digital Financial Literacy, Online Lending Use, and Borrowing Outcomes Among Micro, Small, and Medium Enterprises (MSMEs) in General Santos City

Abstract

Digital lending platforms have expanded credit access for MSMEs, particularly those with limited access to traditional banking services. While these platforms support financial inclusion through faster and more convenient loan provision, they may also expose borrowers to risks such as over-borrowing and financial strain. In this context, digital financial literacy is considered crucial for enabling MSMEs to make informed borrowing decisions. However, limited evidence exists on how digital financial literacy and online lending use jointly influence borrowing outcomes among MSMEs in the Philippine setting. This study examined the relationship between digital financial literacy, online lending use, and borrowing outcomes among micro, small, and medium enterprises (MSMEs) in General Santos City. A quantitative descriptive-correlational research design was used involving 390 MSME owners with prior or current experience using online lending platforms. The sample size was determined using Slovin’s formula. Data were collected using an adopted and modified survey questionnaire that underwent expert validation and pilot test reliability testing, yielding a validation mean of 4.90 and Cronbach’s alpha of 0.701. Weighted mean, Pearsons product-moment correlation, and stepwise multiple regression analysis were used. The findings indicated that the digital financial literacy and use of online lending had very high levels of digital financial literacy and a high level of online lending use (M = 4.29 and 3.97 respectively). The outcomes of the over-borrowing were also evaluated as high (M = 3.65). The dimension of digital financial literacy that was significantly related with borrowing outcomes was the ability to identify online financial risks (r = .125, p = .014). The dimensions of online lending used were all related positively significantly with borrowing outcomes. Frequency of use, loan amounts, and skills in digital financial products usage proved to be significant predictors, accounting for 25.6% of the variation in borrowing outcomes. The study concludes that borrowing outcomes among MSMEs are more closely associated with online lending behavior than with financial knowledge alone. Responsible borrowing practices and borrower education may help reduce borrowing-related challenges.