SMEs' CREDIT DEMAND AND ECONOMIC GROWTH IN INDONESIA

Proceedings of the 5th International Conference on Community Development (AMCA 2018)

This study employs a quantitative study approach to determine the effect of Loan Interest Rate, Non-Performing Loan (NPL), Third Parties Fund (DPK) and Inflation Rate on Micro, Small and Medium Enterprises (MSME) Credit Lending Distribution of commercial banks listed in Indonesian Stock Exchange during 2013-2015 period. The analysis technique used in this study was multiple linear regression and used secondary data published by Indonesia Stock Exchange. There were 39 samples in this study taken by using purposive sampling technique. The result of the study showed that Loan Interest Rate, Non-Performing Loan (NPL), Third Parties Fund (DPK) and Inflation Rate have simultaneous effect on MSME credit lending distribution of commercial banks in Indonesia. The result defines that only Third Parties Fund has positive significant effect on MSME credit loan. Third Parties Fund has the biggest effect in this study while loan interest rate, NPL, and inflation rate has no effect on MSME credit lending.

IOSR Journals , 2019

Financial sector development and economic growth are two fundamental things that being attention in most countries. Direction of the relationship for finance and growth is still being controversy. Based on that problem, this study aims to analyze the relationship between financial sector development and economic growth in Indonesia for period 2010-2018. Indicators used to describe financial sector development are money supply, total credit, and total asset. Granger causality results indicate a demand following pattern in Indonesia which means economic growth can spur financial sector development. Estimate the long-term by using Johansen cointegration suggests that economic growth has a positive and significant impact on financial sector development. While in the short term by using Vector Error Correction Models (VECM), there is a negative relationship between economic growth and financial sector development.

The study employed Co-integration and Error Correction Modelling (ECM) techniques to investigate empirically the impact of commercial bank credit on Nigeria's Small and Medium Scale enterprises (SMEs) between 1986 and 2012.The results revealed that SMEs and selected macroeconomic variables included in the model have a long run relationship with SMEs output. The study also reveals that savings time deposit and exchange rate has a significant impact on SMEs output in Nigeria. Furthermore, commercial bank credit to SMEs, total government expenditure and bank density has direct but insignificant impact on the country SMEs output this may be connected with stringent policy in accessing credit facility and the crowd out effect of government expenditure in the economy. The study also shows that interest rate has adverse effect on SMEs output. The study recommended among others that interest rate on credit facility granted to SMEs should be drastically reduced, commercial banks should grant soft loan to this important sector of the economy and also reduced stringent policy in supply of credit to SMEs and monetary authority should encourage commercial bank to set up more branches in the rural areas in order to encourage rural occupant to save and have assesses to credit facility.

İzmir İktisat Dergisi, 2023

SMEs" are economic units or enterprises that employ less than 250 people and have a net revenue or balance sheet of less than 250 billion TL. According to the data for 2020, 99.76% of all firms operating in Turkey are SMEs. Moreover, 72% of all workers in Turkey work there, and they produce 42.75% of all production. This means that SMEs are an engine of the production and economy of Turkey. This study considers the relationship between SME loans and economic growth with the quarterly data from 2007-2021. GDP was employed as the dependent variable, while total SME loans in the banking sector in Turkey, other loans, the weighted average interest rate for banks' TL commercial loans, and the financial development rate were employed as independent variables. The method employed in the study is the Robust Least Square Method S-Estimation, as extreme conditions and outliers exist during the study period (e.g., the Global Crisis and COVID-19 Pandemic). A dummy variable was added to the model for these conditions. The analysis results show a positive and statistically meaningful relationship between SME loans and economic growth. Similarly, the relationship between GDP and other loans is positive and statistically meaningful. Moreover, the financial development's relationship with GDP is also statistically meaningful but in a negative direction. These argumentative findings are also reflected in the literature as well. The relationship between GDP and credit interest rate is negative and statistically meaningful. While the negative relationship between the dummy variable and GDP indicates that Global Crisis and COVID-19 Pandemic influenced the economy negatively, the positive relationship between GDP and SME loans indicates that SMEs need to be supported, and it is useful and productive for the Turkish economy.

There has not been unanimity on the effect of small and medium scale enterprises lending on economic growth in Nigeria. It is based on this, the study employed time series data from 1992 to 2013 to examine the impact of small and medium scale enterprises (SMEs) lending on economic growth in Nigeria using Augmented Dickey-Fuller (ADF) unit root test, Johansen cointegration test and vector error correction model techniques. The unit test results indicated that all the variables were non stationary at level but became stationary after first difference. The Johansen cointegration test showed evidence of long run relationship between small and medium scale enterprises lending and economic growth. The vector error correction model results revealed that lending to small and medium scale enterprises leads to economic growth in Nigeria. Also, the study found that bank lending rate does not impact on SMEs lending in Nigeria. The implication of these results is that lending to small and medium scale enterprises is crucial to the growth of Nigerian economy. The policy recommendation is that SMEs should be redefined in order to have greater access to fund, lowering of bank lending rate from the prevailing rate; stringent collateral security requirement should be relaxed to increase SMEs access to formal financial institutions, and encouragement of financial institutions to lend to SMEs by providing guarantees, interest rate subsidies. These will enhance credit availability to SMEs which will boost their productivity.

Banks Credit, Macroeconomic Dynamics and the Performance of Small and Medium Scale Enterprises in Nigeria: A Non-Linear ARDL Approach, 2020

This paper examines the impact of banks credit and macroeconomic dynamics on Small and Medium Scale Enterprises in Nigeria using annual data from 1992-2016. The long-run and short-run relationship amongst the variables were examined via the non-linear ARDL model. The Augmented Dickey Fuller (ADF) and Philip Perron's (PP) test reveals that none of the variables were I(2). The Bounds test to cointegration confirms the existence of a long-run relationship. The non-linear ARDL results suggests that in both long and short-run estimations, that a rise in banks credit, government tax revenue and negative shocks in interest rate, inflation rate and exchange rate will trigger a fall in SMEs performance in Nigeria. Furthermore, it was observed that negative shocks tend to be larger in magnitude than positive ones. This study therefore recommends amongst others, that loans to the small and medium enterprises (SMEs) sector be monitored properly, so as to ensure that such loans are not channelled to other purposes.

Timor Leste Journal of Business and Management

This study aims to analyse the impact of credit risk and interest rates on the growth of small and medium enterprises (SMEs) in Dili, Timor-Leste. This study used quantitative questionnaire-based method with a sample of 171 SMEs in Dili, Timor-Leste. Data analysis was conducted using multiple regressions with hypothesis test using t and f values. The results show a positive and significant relationship for credit risk and interest rate on SMEs growth in Dili, Timor-Leste. The result shows that when banks and financial institutions implement credit risk effectively, company growth is increased. On the other hand, the interest rate did not have any impact on the growth of the Small and Medium Enterprises (SMC). This may be because small and medium enterprises (SMEs) do not pay attention to the Bank interest rate when they ask for credit.

Journal of Asian Multicultural Research for Economy and Management Study, 2021

Loans or credits offered by Kopdit credit unions are a potential source of funds that need to be developed, to help accelerate the home industry and the micro and small economies. Therefore, we want to see the impact of several conditions such as the loan interest rate, GDP per capita growth, inflation rate and economic growth. Quite a number of studies have looked at the impact of interest rates, GDP growth, inflation rates and economic growth on loans or credits to banks or banking institutions. We do not look at credit or loans from banks, but on Kopdit credit unions (CU). The results of our research show that simultaneously the loan interest rate, GDP growth, inflation rate and economic growth have a strong enough influence on loans at Credit Union Credit Unions, namely 79.2454%. Partially the variable of loan interest rate, GDP growth per capita, inflation rate affects outstanding loans, while economic growth partially has no effect on outstanding loans.

Return, 2024

This research aims to analyze the effect of MSME fund disbursement and non-performing financing (NPF) on Indonesia's economic growth in the 2015-2022 period. The research method used is quantitative with a descriptive approach. The data used comes from secondary data sources, such as the financial statements of the Financial Services Authority (OJK) and the Central Bureau of Statistics. The results showed that partially, the distribution of MSME funds had a positive and significant effect on Indonesia's economic growth. This shows that financial support provided to MSMEs through the distribution of funds makes an important contribution in encouraging better economic growth. However, partially, non-performing financing (NPF) has an insignificant negative effect on economic growth. Although the NPF problem may affect the financial sector, the results of this research show that its impact on overall economic growth is not significant. Simultaneously, MSME disbursement and NPF have a positive and significant influence on Indonesia's economic growth. This result confirms the importance of good management of MSME disbursement and NPF control in supporting sustainable economic growth. The implication of this research is that proper allocation of funds to MSMEs can improve business efficiency and development. In addition, effective handling of the NPF problem can minimize its negative impact on economic growth. Thus, policies that support good disbursement of MSME funds and effective NPF control can contribute to stronger and more sustainable economic growth in Indonesia.

Economics Development Analysis Journal, 2018

This study aims to examine the causality and role as the variables of the financial sector deepening with economic growth in Indonesia. The test of causality in this research acres using heading Granger Causality Test and VECM test. The tests are conducted using annual data from 1986 to 2015. The result of research using heading Granger Causality shows that there is no causality between M2 ratio with economic growth. While the ratio of private credit by deposit money banks and gross fixed capital formation ratio has a one-way causality with economic growth. The ratio of total outstanding international debt securities with economic growth has bidirectional causality. Based on the results of VECM in the long run, the ratio of private credit by deposit money bank has a negative effect on economic growth and the ratio of total outstanding international debt securities has negative effect and not significant on GDP.