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I. INTRODUCTION
1.1 Background
Micro, small, and medium enterprises MSMEs have strategic roles in global economy especially in the developing country. MSMEs are the dominant
sector in many countries, like in China 99,9 percent, Russia 98 percent, and Portugal 98 percent. The huge number of MSMEs in each countries enable them
to have big contribution in nation‟s GDP, employment, export, etc. World Bank 2003 listed the importance of MSMEs globally i.e. 1 They are engine of
growth, 2 They create a competitive and efficient market, and 3 They are important in poverty alleviation.
Nevertheless there are some problems hampering MSMEs development. The problems are related to their characteristics; small size, widely dispersed, and
has limited resource World Bank, 2003. Small size makes them become lack of economies of scale and facing a high cost of information. Widely dispersed causes
them become lack of collective voice and bargaining power. Limited capital background renders them to have limited management capability.
As a consequence, lack of access to credit is one of the results of these problems. Credit rationing among MSMEs happens because of asymmetric
information and imperfect competition in credit market which lead to the market failure. Market failure in credit market makes MSMEs cannot get credit access
especially credit from formal lenders. This condition can be filled by informal credit market, but amount of credit from informal lenders is often too small to
fulfill MSME‟s needs and the informal lenders often impose them a high interest rate Bebczuk, 2001. MSMEs have a limited capital background therefore access
to credit is one of important thing in MSMEs success. Lack of access to credit causes MSMEs could not expand their production and their market and then
inhibit their growth. MSMEs are also important sector in Indonesia. They are the back bone of
Indonesian economy with the share in enterprise‟s number reaches 99.99 percent.
MSMEs also contribute 97 percent of employment and 56.53 percent of GDP Indonesian Cooperative and SMEs Ministry, 2009. MSMEs, especially micro
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and small enterprise are mostly engaged in agricultural sector therefore they have strategic roles in agricultural and rural development, and also in reduction of
unemployment and poverty.
1.2 Statement of Problem
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