Determinants of MSMES’ credit access: Evidence from Indonesian banks

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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.

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    • Table 1. Variable description and measurement
    • Table 2. Descriptive statistics of each industry
    • Table 3. Correlation matrix between variables
    • Table 4. Effect of operating cost, bank stability, and bank capital on MSME credit access (FEM robust)
    • Table 5. Influence of operating cost, bank stability, and bank capital on MSME credit access in business scale (FEM robust)
    • Table 6. Effect of operating cost, bank stability, and bank capital on MSME credit access (GMM)
    • Conceptualization
      Hadi Ismanto, Atmaji, Endang Suhari
    • Data curation
      Hadi Ismanto
    • Formal Analysis
      Hadi Ismanto, Atmaji, Endang Suhari
    • Funding acquisition
      Hadi Ismanto
    • Investigation
      Hadi Ismanto, Atmaji, Endang Suhari
    • Methodology
      Hadi Ismanto, Atmaji, Endang Suhari
    • Project administration
      Hadi Ismanto
    • Resources
      Hadi Ismanto, Atmaji, Endang Suhari
    • Software
      Hadi Ismanto
    • Supervision
      Hadi Ismanto, Atmaji, Endang Suhari
    • Validation
      Hadi Ismanto, Atmaji, Endang Suhari
    • Visualization
      Hadi Ismanto, Atmaji, Endang Suhari
    • Writing – original draft
      Hadi Ismanto
    • Writing – review & editing
      Hadi Ismanto, Atmaji, Endang Suhari
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Banks and Bank Systems
Banks and Bank Systems