| dc.description.abstract | The development of MSMEs has become a great way to increase economic
growth and employment. One of the reasons that banks are reluctant to lend
to SMEs is information asymmetry. In order to solve this problem, the
development of a nationwide SME credit risk database similar to the credit
risk database of Japan that accumulates SME databases and acts as a credit
scoring company for SMEs needs to be established in Indonesia. This could
be a useful soft infrastructure for the development of SMEs in this country
(Kuwahara et al. 2015). The sector in which an MSME operates also affects
the decision to grant credit. In addition, the location of an MSME in rural
or urban areas is a determining factor for financial institutions in granting
credit.
In addition, banks have to follow more rules and regulations in granting
credit than nonbank financial institutions do. The rules include collateral requirements,
financial reports,
and business licenses and other prudential
provisions
that
should be obeyed by potential customers. On the other hand, most MSMEs,
particularly
micro
and small enterprises, generally have not yet been informed
about the system and the procedures for borrowing from banks. Consequently,
in many cases, their loan applications are not complete in terms of document
requirements and are returned by the bank. The procedures are then thought
to be time consuming for the MSME. What is more, the banks have little
information on the business or potential commodities to be funded and on
other MSME data. The other problem is the relatively high operational cost of
providing credit for micro and small enterprises compared to credit for large
enterprises both in rural and urban areas. | en_US |
