Digital Financial Innovation Adoption and SME Financial Performance: The Mediating Role of Financial Inclusion in Developing Economies

Abstract

Purpose: This paper develops a theory-driven conceptual framework that explains this relationship by positioning financial inclusion as a mediating mechanism. Methodology: The study employs a structured review of relevant literature and integrates insights from the Resource-Based View (RBV), the Unified Theory of Acceptance and Use of Technology (UTAUT), and Financial Intermediation Theory. DFI adoption is conceptualized as a multidimensional construct comprising the decision to adopt, integration into business operations, and diversity of digital financial innovations utilized. Findings: The review suggests that DFI adoption improves operational efficiency, liquidity management, and business growth. These benefits are largely achieved through enhanced financial inclusion, which strengthens SMEs' access to, usage of, affordability of, and quality engagement with formal financial services, thereby improving financial performance. Unique Contribution to Theory, Policy and Practice: The study contributes to theory by integrating RBV, UTAUT, and Financial Intermediation Theory in to a unified conceptual framework explaining how DFI adoption influences SME financial performance through financial inclusion. It further advances knowledge by proposing a multidimensional conceptualization of DFI adoption and identifying financial inclusion as the key transmission mechanism. The framework offers practical guidance for policymakers, financial institutions, and SME managers seeking to promote financial inclusion and sustainable SME growth through digital financial innovations.