The Influence of Business Performance on Credit Accessbility to Micro and Small Enterprises (MSEs)

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.

Environmental Sustainability Commitment and Access to Finance by Small and Medium Enterprises: The Role of Financial Performance and Corporate Governance

“…This entails that there is a relationship between financial performance and access to finance by SMEs [79]. Existing studies submit that most lending institutions prefer firms that perform well over those that are not profitable [16,17]. Consistent with the Trade-off theory [80], being profitable means a business will have the ability to repay a loan without defaulting.…”

“…In this case, banks usually prefer businesses with positive cashflows and traceable records of profitability [79]. Existing studies report that most profitable businesses do not usually experience barriers in accessing credit facilities [16,81]. There is evidence that financial performance positively predicts access to finance by SMEs [16,78,81].…”

“…On this account, this study proposes that financial performance can provide the mechanism through which environmental sustainability commitment can effectively predict access to finance. Existing studies submit that most lending institutions prefer firms that perform well and have a track record of credit history [16,17].…”

“…Corporate governance refers to the adoption and implementation of systems to safeguard the rights and interests of stakeholders by ensuring that managers act in an accountable and transparent manner [14]. There is evidence that corporate governance plays a significant role in the small business sector in the same way that it does in larger entities [10,16,18]. Even though small unlisted firms are believed to not have shareholders, in certain instances they have investors and debts, which can entail the need to have proper mechanisms to safeguard stakeholders' rights and keep them informed about the business [19,20].…”

Competitive Advantage Analysis in Micro Enterprises and Small (Mses) Culinary

“…Business performance is a condition to be achieved as a result that all company components carried out. In this case, the business performance indicators are measured by the respondent's statement of changes in sales volume so that the company's existence is always carried out and constantly maintained so that it can find out consumer responses to the company's products (Chandrayanti, 2022). So it can be concluded that the performance of a business is everything that consumers want in a product or service by maximizing the quality of the results that consumers will receive.…”