Relational Capital in the Shadow Economy: A Qualitative Ethnographic Inquiry into Informal Financial Practices Among Small Business Owners in Makassar, Indonesia

Andi Mustika Amin (Universitas Negeri Makassar, Indonesia)

IJHABS
Vol 3 No 4 (2026): April

MSMEs play a vital role in Southeast Asia’s economy, yet many still rely on informal financial systems. Despite growing interest in MSME development, limited studies explore how informal finance operates within local cultural contexts in Eastern Indonesia. This study investigates informal financial practices among small business owners in Makassar, Indonesia, focusing on arisan, kinship-based lending, and undocumented cash transactions. Using a qualitative ethnographic approach, data were collected through participant observation and in-depth interviews with 18 entrepreneurs over six months. The findings show that informal finance functions as a culturally embedded system based on trust, social solidarity, and flexibility, helping entrepreneurs access capital and manage uncertainty. However, these practices also create limitations for business scalability, financial transparency, and long-term growth. The study concludes that informal finance is not merely a sign of institutional weakness, but a socially adaptive economic mechanism that should be considered in developing inclusive financial policies for MSMEs.