Interest Margin versus Small Medium Enterprises Financing: Does Bank Ownership Matter?

DOI

10.2991/icbmr-17.2017.21How to use a DOI?

Keywords

SMEs; Financing; Indonesia; Interest Margin

Abstract

The Indonesian government wants to promote small and medium enterprise financing as a type of relationship lending while at the same time reducing interest margins. Otherwise, relationship lending tends to lead into high levels of interest margins. This paper examines the relationship between SME financing and interest margin in Indonesia using panel data on 124 banks in Indonesia from 2008 to 2014. Furthermore, we also identify the direction of SME financing in relation to the ownership of banks. We use panel data regression and GMM methods to ensure the robustness of the result. The overall results suggest that SME financing positively increases the interest margin since relationship lending charges greater margins for each transaction. The results confirm the regulatory conflict between the interests of promoting small/medium enterprise financing and reducing the interest margin. However, we find a difference in sign and significance level of SME financing for each type of bank ownership as the result of SME financing readiness

Copyright

© 2017, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Muhammad Miqdad Robbani
AU  - Hasan Ashari
AU  - Liyu Adhi Kasari Sulung
PY  - 2017/11
DA  - 2017/11
TI  - Interest Margin versus Small Medium Enterprises Financing: Does Bank Ownership Matter?
BT  - Proceedings of the International Conference on Business and Management Research (ICBMR 2017)
PB  - Atlantis Press
SP  - 217
EP  - 226
SN  - 2352-5428
UR  - https://doi.org/10.2991/icbmr-17.2017.21
DO  - 10.2991/icbmr-17.2017.21
ID  - Robbani2017/11
ER  -