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Some human capital related variables also usually influence the probability of firms get access to formal credit e.g. managerial competency and
business planning Fatoki and Odeyemi, 2010. These skills are important because banks usually use business plan to evaluate the firms when they decide to give
credit to the firms. Managerial and business planning competencies are the result of education, vocational training, or participation in extension service Fatoki and
Odeyemi, 2010.
2.2 MSMEs and the Role of Access to Credit in Their Success
In Indonesia, micro, small, and medium enterprises are distinguished by their net asset and net annual sales. According to the Indonesian law number
20 in 2008, the criteria of micro, small, and medium enterprise in Indonesia is
showed on the table below.
Table 1. Criteria of Micro, Small, and Medium Enterprise in Indonesia
Criteria Micro
Small Medium
Net Asset without land
and building ≤ Rp 50
Million Rp 50 million
- ≤ Rp 500
million Rp 500 million
≤ Rp 10 billion
Net Annual Sales
≤ Rp 300 million
Rp 300 millon ≤ Rp 2,5 billion
Rp 2,5 billion - ≤ Rp 50 billion
Source: Indonesian Law Number 20, 2008
While the BPS and the Industrial Ministry of Indonesia classify micro, small, and medium enterprises based on the number of labor. Micro-enterprise
is a business that has 1-4 employees, while small enterprise has 5-19 employees, medium enterprise has 20-99 employees, and large enterprise has
more than 100 employees. MSMEs are the most dominant sector in Indonesia‟s economy. Their contribution compared with big enterprises is
described in the following table 2.
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Table. 2 Comparison Data of Micro, Small, Medium, and Big Enterprises in
Number, Employment, and GDP 2009
Type of Enterprise
Number of Business Unit
Employment GDP
Number Units
Percentage Number
People Percentage
Amount Rp
Percentage
Micro 52,176,795
98.88 90,012,694 91.03 1,751,644.60
33.08 Small
546,675 1.04
3,521,073 3.56
528,244.20 9.98
Medium 41,133
0.08 2,677,565
2.71 713,262.90
13.47 Big
4,677 0.01
2,674,671 2.7 2,301,709.20
43.47
Source: Indonesian Cooperative and SMEs Ministry
MSMEs in Indonesia have special characteristics. Tambunan 2008 explains the characteristics of MSMEs in Indonesia are ; 1 Easily accessed
because they do not require large capital; 2 Rely on local resources; 3 Family ownership; 4 Small-
scale business‟s activities; 5 Traditional production technology; 6 Low quality and low productivity of products; 6 Labor intensive;
7 Less Educated; 8 Low and not stable Profit; 9 Competitive market with no special regulation; 10 Local level marketing.
Success of MSMEs is influenced by some variables. Access to credit is one of the key factors of the success of MSMEs. Availability and accessibility of
credit have a positive impact to the firm‟s performance in terms of purchasing input, increasing
product‟s quantity and quality, marketing process, and soon. Those activities will lead to a higher profit from business. Using logit model,
several researchers have analyzed that the main factors influencing the success of MSMEs in Indonesia are financial access Indonesian Cooperative and SMEs
Ministry, 2005; Bowo, 2003; Prasetyo, 2010; Darroch and Clover, 2005. Jasra et al 2011 also found that the most important factor influencing the success of
small firms in Pakistan is financial resources, which is equivalent with access to credit. Access to credit also significantly influence the success of MSMEs in
Tanzania Kuzilwa, 2005. In line with results which describe the positive impact of access to credit in business success, lack of credit has the negative impact to
business performance.
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Besides access to credit, variable of socioeconomic characteristics of the firm‟s owner, business characteristics, and human capital variables are also used
by several researchers to analyze factors influencing MSMEs success. One of Socioeconomic variables which is statistically significant to influence MSMEs
‟s success is
experience of the firm‟s owners Bosma, 2000 ; Roy 2004; Saleem 2012. Experience in business activity describes how long the entrepreneur has
involve d in his business. A longer period of experience shows that the firm‟s
owner has managed the firm well so the firm can survive facing the obstacles and gain profit. Other variables is education Bosma 2000; Rob and Fairly, 2008,
because education level of the firm‟s owners describes their level of knowledge,
so the owners use their knowledge to make a good strategy and appropriate decision for their business. Bosma 2000 find that variable of age also influence
the MSMEs success, he said that a younger entrepreneur tend to make more profit than the older.
Business related variables which significantly influence the success of MSMEs is business type Saleem, 2012, which shows the nature of goods. Other
variable are training and extension service Kuzilwa, 2005, because these activities increase the firm‟s owners knowledge and skill so they can apply it in
their business. Kuzilwa 2005 find that MSMEs which receive training and extension service perform better than those who do not. Bosma 2000 analyze
that other profit resource also a significant determinant of MSMEs success but in negative relationship, it means that other profit
resource decrease the firm‟s profit.
Human capital related variables are relatively difficult to define because they are basically qualitative variables which need to be quantified in regression
model. Human capital related which are significantly affect the business success is marketing strategies Jasra et al, 2011, because market development is
important to enhance MSMEs growth and success. But, most of MSMEs do less marketing and sell their product without market orientation Jasra et al, 2011.
Another human capital related variable is entrepreneurial skill Kuzilwa 2005, Jasra et al 2011 e.g. ability to create a business plan. This skill is important
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because well planned business activities will make the firms become more efficient and more profitable.
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III.
FRAMEWORK
3.1 Theoretical Framework 3.1. 1 Concept of Access to Credit and Credit Limit
