Integrating Circular Economy Principles into Financial Risk Management: A Strategy for Growth and Sustainability of Rumah Dangke, an Indonesian MSME

Abstract

Micro, Small, and Medium Enterprises (MSMEs) play a vital role in Indonesia’s economy but often face significant financial risks due to volatile input costs, limited access to financing, and market uncertainty. This study examines the case of Rumah Dangke, a traditional dairy based food MSME in South Sulawesi, to identify internal and external factors influencing its business sustainability and to formulate strategic financial risk management approaches. Using a qualitative case study design, the research employs SWOT (Strengths, Weaknesses, Opportunities, Threats) and QSPM (Quantitative Strategic Planning Matrix) analyses. Internally, Rumah Dangke demonstrates strengths such as an organized financial system, diversified capital sources, stable market demand, and efficient production processes. However, it faces weaknesses including limited financial literacy, inconsistent documentation, dependence on local raw materials, and restricted access to external financing. Externally, opportunities include growing market demand, government and institutional support, digital market access, export potential, and collaboration with other MSMEs and the culinary sector. Key threats involve raw material price volatility, rising production costs, competition from substitutes, regulatory changes, and shifting consumer preferences. A key strategic approach identified is the SO (Strengths–Opportunities) strategy, which integrates circular economy (CE) principles into financial risk management. Rather than replacing fresh milk, the primary raw material CE practices aim to buffer financial volatility by generating additional value from by–products (e.g., repurposing whey into secondary food products or animal feed) and reducing operational costs (e.g., using biogas from dairy waste for energy). These measures enhance cost efficiency, reduce exposure to milk price fluctuations, and improve long–term business resilience. Implementing CE not only strengthens Rumah Dangke’s competitiveness but also aligns its operations with environmentally responsible and sustainable business practices. Specifically, repurposing whey a by–product of dangke’s papain–based coagulation process into value added products offers a practical circular economy entry point that improves cost efficiency and reduces environmental impact. Keywords: Circular economy, financial risk management, MSME sustainability, dairy industry, financing, circular economy

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