The Role of Digital Finance in Transforming the India’s MSMEs: A Systematic Literature Review and Thematic Analysis

Abstract

The main aim of this paper is to assess the role of financial digitalization in India’s transformation by understanding the key drivers for adopting digital finance, challenges in using digital finance, and its impact on MSMEs. In order to achieve this objective, a systematic literature review (SLR) along with thematic analysis has been conducted to analyze the data. Using PRISMA guidelines, by screening 310 articles between 2014-2025 and 140 have been finalized for the review. The papers for study have been chosen from various academic databases, including Scopus, Google Scholar, ScienceDirect, and ResearchGate. MSME performance has been improved meticulously by better and easier access to credit, improvised operational efficiency, and open new avenues of market for small businesses. The five most influential factors in determining whether MSMEs will adopt digital financial services include:  1) level of digital literacy within a business, 2) the technology skills possessed by staff members, 3) the level of perceived benefits and usefulness of the service, 4) heterogeneity of the firm, and 5). support provided by the Government. Even with these factors, there are still some challenges, such as problems of trust, absence of technological facilities, cybersecurity fears, and insufficient knowledge about digitalization, which mostly concern small firms as well as those working in the rural sector.  This paper offers a thorough synthesis of the fragmented literature and suggests a conceptual framework that connects MSME performance, fintech adoption, and digital literacy, providing insightful information for academics and policymakers