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SMEs' CREDIT DEMAND AND ECONOMIC GROWTH IN INDONESIA

Author

Listed:
  • M. Shabri ABD. MAJID

    (Senior Lecturer, Faculty of Economics and Business, Syiah Kuala Kuala University, Indonesia)

  • HAMDANI

    (Financial Consultant for the SMEs and Bank's Partner, Aceh Province, Indonesia, Graduate Student in Economics, Faculty of Economics and Business, Syiah Kuala Kuala University, Indonesia)

  • Muhammad NASIR

    (Senior Lecturer, Faculty of Economics and Business, Syiah Kuala Kuala University, Indonesia)

  • FAISAL

    (Senior Lecturer, Faculty of Economics and Business, Syiah Kuala Kuala University, Indonesia)

Abstract

This study aims at empirically exploring the short- and long-run relationships between economic growth, non-performing loans, interest rates and the credit demand by the small and medium enterprises (SMEs) in Aceh province, Indonesia. The quarterly data for the period 1995 to 2015 were analyzed by the cointegration and vector error correction model (VECM). The study documented that there was a cointegration among the economic growth, non-performing loans, interest rates and the credit demand, implying the existence of long-run equilibrium among the variables. In addition, in short-run, the study found a unidirectional causality from economic growth to credit demand, a bidirectional causality between interest rates and credit demand, while no causality existed between non-performance loan and credit demand by the SMEs in Aceh, Indonesia. Thus, to enhance the SMEs, the government should focus on promoting the economic growth by managing the stability of interest rates in the province.

Suggested Citation

  • M. Shabri ABD. MAJID & HAMDANI & Muhammad NASIR & FAISAL, 2018. "SMEs' CREDIT DEMAND AND ECONOMIC GROWTH IN INDONESIA," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 121-133, July.
    • Handle: RePEc:hrs:journl:v:x:y:2018:i:2:p:121-133
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    References listed on IDEAS

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    More about this item

    Keywords

    Credit demand; Economic growth; Non-performing loan; SMEs.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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