Endang Suhari

Credit is an important component in developing micro, small, and medium enterprises (MSMEs), as it can boost a country’s economy, help boost the production capacity of MSMEs, create jobs, and reduce poverty. This study aims to examine the characteristics of banks in Indonesia that influence lending to micro, small, and medium enterprises by adopting agency theory that explains the relationship between lenders (banks) and borrowers (MSMEs) as agents and principals. Data were taken from quarterly financial reports of banks in Indonesia. There are 42 sample banks from 2010 to 2022, so the data used are 2,182 observations. Data analysis uses a fixed effect model with robust standard errors. The results show that operating costs do not influence credit access for MSMEs or medium-sized enterprises. Bank stability has an impact on increasing MSME credit access. High bank capital also increases MSME credit access. Robustness tests were also conducted using the general method of moments. The results were consistent with the main model. The implication is that cost management theory and credit decision-making need to consider differences in business scale. The results also further strengthen the argument that bank stability is an important factor that can improve access to credit for small and medium enterprises.

Acknowledgments
Appreciation is given to the Doctoral program Universitas Sebelas Maret Surakarta Indonesia and the Institute of Research and Community Services (LPPM) Unisnu Jepara Indonesia, which has supported this research.