Abstract
This study investigates the influence of performance of micro and small enterprises on accessing external finance from banks. This study used data from 30 respondents of MSEs by survey questionnaires in West Sumatera, Indonesia. The study used simple linear regression model with the access of credit as the dependent variable and performance of business as the independent variable. The results confirm that the performance of MSEs significantly affect accessibility to external finance from banks. The study recommended that both financial and non-financial measures are important in determining access to credit. Therefore, businesses have to improve their resources in order to increase their performance and to improve their accessibility to credit. Due to their limitations in preparing financial statements, the hybrid approach of using financial and non-financial measures should be considered by financial institutions to assess the conditions of the business. A conductive environment should be created for good relationships among stakeholders.
Highlights
The Micro and Small Enterprises (MSEs) have a significant role in the economy of Indonesia
This study investigates the influence of performance of micro and small enterprises on accessing external finance from banks
As the companies become bigger, they need more capital (Sadeghi, 2018). They cannot rely on internal finance, because it is not adequate; so, they look for external finance (Mamman et al, 2019)
Summary
The MSEs have a significant role in the economy of Indonesia. Most of the businesses in West Sumatera are of the micro and small enterprise type. Micro small medium enterprises in Indonesia have difficulties in accessing credit from formal financial institutions due several factors. Increasing the credit access can be done through the demand side (improvement of human resources, capital, technology, management and marketing) and the supply side (improvement of formal financial institutions, government policy which support small businesses and central bank policy (Andariyani, 2018; Nurjanah & Suryantini, 2019). This paper will focus on how performance of micro small enterprises affect their ability to access external financing from formal financial institutions. It will propose some strategies for MSEs to get credit easier by improving their performance
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
