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Access to finance and small enterprise growth:evidence from East Java

Author

Listed:
  • Michael A. McPherson
  • Jeffrey J. Rous

    (University of North Texas, USA)

Abstract

The widespread acknowledgement of the centrality of micro and small businesses in the development process has led to a proliferation of projects and programs designed to assist and promote these businesses. This research examines the common assumption that access to credit from formal financial institutions is an important determinant of growth at the firm level. Our data are from a recent survey of 858 small businesses in East Java. We employ a full information maximum likelihood approach known as discrete factor method. The results indicate that access to credit is not a significant determinant of small firm growth; instead, other observable and unobservable characteristics of firms appear to cause growth.

Suggested Citation

  • Michael A. McPherson & Jeffrey J. Rous, 2010. "Access to finance and small enterprise growth:evidence from East Java," Journal of Developing Areas, Tennessee State University, College of Business, vol. 43(2), pages 159-172, January-M.
    • Handle: RePEc:jda:journl:vol.43:year:2010:issue2:pp:159-172
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    Citations

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    Cited by:

    1. Girum Abebe & Biruk Tekle & Yukichi Mano, 2018. "Changing Saving and Investment Behaviour: The Impact of Financial Literacy Training and Reminders on Micro-businesses," Journal of African Economies, Centre for the Study of African Economies, vol. 27(5), pages 587-611.
    2. Rajesh SN Raj & Kunal Sen, 2016. "Moving out of the bottom of the economy? Constraints to firm transition in the Indian informal manufacturing sector," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-20, December.
    3. Dhaniel Ilyas, 2017. "Preliminary Finding of Small and Micro Firms Resilience in Indonesia," LPEM FEBUI Working Papers 201715, LPEM, Faculty of Economics and Business, University of Indonesia, revised Dec 2017.
    4. Miller, Paige & Brux, Jacqueline Murray & Neema, Clementia Murembe, 2016. "Microcredit in Uganda: Fundamental Reform or Just another Neoliberal Policy?," African Journal of Economic Review, African Journal of Economic Review, vol. 4(2), July.
    5. Esa A. Asyahid & Elan Satriawan, 2024. "The Nature of Self-Employment in Indonesia: Entrepreneurship or Survival Strategy?," Gadjah Mada Economics Working Paper Series 202403002, Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada.

    More about this item

    Keywords

    Micro and Small Enterprises; Credit; Growth;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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