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Transaction cost of micro and small enterprises financing

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  • Ghana Atma Sulistya
  • Darwanto

    (Faculty of Economics and Business, University Diponegoro
    Faculty of Economics and Business, University Diponegoro)

Abstract

High transaction costs have become one of the obstacles for the micro and small en- terprises (MSEs) to access financial loans to the bank. In order to minimize the transaction costs, group lending scheme become an alternative, so that both sides pay lower transaction costs, and MSEs are able to improve their welfare. This study aims to analyze the credit process and transaction costs incurred on the model of individu- als and groups lending and to compare the magnitude of transaction costs in both models. A mixed method analysis is used to analyze the component of transaction costs and the magnitude of the transaction cost in both models.The analsys results indicate that there are differences in transaction costs incurred on both schemes. In the amount of the transaction costs, the overall group scheme allows for greater ones compared to that of individual schemes, and that it was dominated by the cost of the disbursement. Even so, the per member group transaction cost is much smaller than that of the individual schemes.

Suggested Citation

  • Ghana Atma Sulistya & Darwanto, 2016. "Transaction cost of micro and small enterprises financing," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 8(2), pages 171-186, April.
    • Handle: RePEc:uii:journl:v:8:y:2016:i:2:p:171-186
    DOI: 10.20885/ejem.vol8.iss2.art9
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    References listed on IDEAS

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    5. Orazio Attanasio & Britta Augsburg & Ralph De Haas & Emla Fitzsimons & Heike Harmgart, 2011. "Group lending or individual lending? Evidence from a randomised field experiment in Mongolia," IFS Working Papers W11/20, Institute for Fiscal Studies.
    6. Claude Menard & Mary M. Shirley (ed.), 2005. "Handbook of New Institutional Economics," Springer Books, Springer, number 978-0-387-25092-2, June.
    7. Beatriz Armendáriz & Jonathan Morduch, 2010. "The Economics of Microfinance, Second Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262014106, December.
    8. Swamy, Vighneswara & B.K, Tulasimala, 2011. "Financial Intermediaries and Economic Development – A Study of Transaction Costs of Borrowing for the Poor," MPRA Paper 47516, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. Alabi F. A., 2019. "A Study on the Relationship Between New Business Start Up and Micro Credit Institution and Business Growth of Small Scale Enterprises," Business Management and Strategy, Macrothink Institute, vol. 10(1), pages 181-201, December.
    2. Motiniva Nayak, 2017. "The impact of commercial bank’s characteristics on micro, small, and medium enterprises in India," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 9(1), pages 1-10, April.
    3. Fabiane Tubino Garcia & Carla Schwengber ten Caten & Elaine Aparecida Regiani de Campos & Aline Marian Callegaro & Diego Augusto de Jesus Pacheco, 2022. "Mortality Risk Factors in Micro and Small Businesses: Systematic Literature Review and Research Agenda," Sustainability, MDPI, vol. 14(5), pages 1-37, February.

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    More about this item

    Keywords

    Institutional Economics; Transac- tion Cost; Micro and Small Entre- preneur; Group Lending; Sequen- tial Exploratory Design;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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