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Impact of Microcredit on SMEs Performance in Malaysia

Author

Listed:
  • Rafiatul Adlin Hj Mohd Ruslan

    (Islamic Finance and Finance Section, Business School, Universiti Kuala Lumpur, Malaysia)

  • Christopher Gan

    (Agribusiness and Commerce, Department of Financial and Business Systems, Lincoln University, New Zealand)

  • Baiding Hu

    (Agribusiness and Commerce, Department of Financial and Business Systems, Lincoln University, New Zealand)

  • Nguyen Thi Thieu Quang

    (University of Economics, University of Danang, Vietnam)

Abstract

This study investigates the relationship between access to microcredit and SMEs’ performance. Using survey data on SME’s owners/managers in Terengganu, Malaysia in 2016, the study investigates how access to microcredit affects SME sales and employment growth. Employing the Propensity Score Matching method (PSM), the study showed that SMEs with microcredit borrowing had their sales 25.6% to 25.7% higher than non-microcredit borrowers. After minimizing the selection bias from both observable and unobservable characteristics using Differences in Differences method (DID), the difference was much larger (28.7%). However, both PSM and DID analyses revealed no impact of microcredit access on SME employment growth. The Endogenous Switching Regression method (ESR) confirmed these findings.

Suggested Citation

  • Rafiatul Adlin Hj Mohd Ruslan & Christopher Gan & Baiding Hu & Nguyen Thi Thieu Quang, 2020. "Impact of Microcredit on SMEs Performance in Malaysia," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 19(1), pages 109-130, June.
    • Handle: RePEc:ijb:journl:v:19:y:2020:i:1:p:109-130
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    References listed on IDEAS

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    2. Zhang, Cheng & Zhao, Ziwei & Wang, Qunwei & Xu, Bing, 2022. "Title: Holistic governance strategy to reduce carbon intensity," Technological Forecasting and Social Change, Elsevier, vol. 179(C).

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    More about this item

    Keywords

    Microcredit; Malaysia; SME performance; Propensity Score Matching; Endogenous Switching Regression;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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