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Indonesian MSMEs and their access to financing

Author Affiliations

  • 1Center for Industry, SME and Business Competition Studies, University of Trisakti, Jakarta, Indonesia

Int. Res. J. Social Sci., Volume 10, Issue (1), Pages 41-51, January,14 (2021)

Abstract

As in many other developing countries, in Indonesia small size businesses are very important. Their number reached 99% of the number of companies and accounted for 92% of job creation. However, many of them, especially from the micro and small enterprises category, have difficulties to grow or even to sustain, including limited access to finance. This paper presents the results of a study on the financing of micro, small and medium enterprises in Indonesia. As a descriptive study, it is based on secondary data analysis on their main obstacles, the annual growth of loans granted to these enterprises from commercial banks, and their main financial sources. There are three important findings: (i) limited funds is their main constraint, especially from the micro and small enterprises category, (ii) the majority of micro and small enterprises depend on credits from informal sources, and (iii) for those who have never borrowed money from banks lack of collateral is main reason (except not interested).

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