Title:
INDONESIAN SMALL BUSINESSES AND THEIR ACCESS TO FINANCING

Authors:
Tulus T. H. Tambunan ,Indonesia

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 (MSEs) category, have difficulties to grow or expand their production capacity, or even to sustain, including limited access to finance from formal sources like bank and other non-bank financial institutions. This paper presents the results of a study on the financing of micro, small and medium enterprises (MSMEs) in Indonesia. The approach used in this study is descriptive and analytical in nature and is based on secondary data collected from various official/government sources on their main obstacles, the annual growth of loans granted to these enterprises from commercial banks, and their main financial sources. This paper presents three important findings from the study: (i) limited funds is their main constraint, especially from the MSEs category, (ii) the majority of MSEs depend on own money or loans from informal sources, and (iii) for those who have never borrowed money from banks, lack of collateral is the main reason (except not interested)