Moderating effect of digital literacy on digital financial services and financial behavior of MSMEs

Digital financial services have become essential in strengthening the financial operations of Micro, Small, and Medium Enterprises (MSMEs), particularly as businesses adapt to an increasingly digital economic environment. While digital tools are widely recognized for enhancing business processes, limited research has focused on how digital financial services and digital literacy influence the financial behavior of MSMEs. This study examined the relationship between Digital Financial Services (DFS), digital literacy, and financial behavior among MSMEs in the food sector of Calapan City. A descriptive-correlational research design was used, and data were collected from 170 MSMEs using a researcher-developed questionnaire assessing DFS usage, digital literacy, and financial behavior across saving, financing, investing, and spending. The results further showed that digital literacy strengthens the effectiveness of DFS by enabling MSMEs to apply digital tools more confidently and strategically. The study highlights specific behavior areas with lower adoption, such as separating digital savings, using digital loan platforms, monitoring investments digitally, and maximizing digital payment systems. These gaps reflect the need for targeted interventions that improve MSMEs’ competencies in leveraging financial technologies. The findings emphasize the importance of DFS and digital literacy as key drivers of improved financial decision-making, stronger financial management, and greater business resilience within the MSME sector.