ISSN: 2222-6990
Open access
Over the past decade, the contribution and the role of SMEs has been clearly acknowledged as the backbone of economic growth in Malaysia. As SMEs contribute towards economic growth, the SME development has had increased interest from policymakers and has been placed high on the government development agenda. The involvement of the banking institutions in the microfinance industry is significant in ensuring financial inclusion by providing microcredit to SMEs. Accordingly, SMEs have many choices of microcredit providers, and recognising the factors that influence the choice of providers is vital to understand SMEs’ performance better. This paper investigated three choices of microcredit providers in Malaysia: microfinance institutions, commercial banks, and development financial institutions and the behaviour influences of small to medium enterprises (SMEs) microcredit borrowers. A multinomial logit (MNL) regression was utilised to investigate the microcredit provider chosen by SMEs, and empirical findings indicate that different loaning features of microcredit providers like credit amount, location of the provider, loan handling, the duration of loan, and method of interest payment significantly influence the demand of microcredit among SMEs. Understanding the various microcredit provider preferences among SMEs' will support policymakers and microcredit providers to increase financial presence and the growth of SMEs, leading to a boost in the nation’s economy.
Abd Rahman, R., Ahmad, S., & Wahid, H. (2008). Perlaksanaan Bantuan Modal Zakat: Analisis Perbandingan. Seminar Kebangsaan Ekonomi Malaysia 2008.
Wahab, S., Al-Mamun, A., Mazumder, M. N., & Zhan, S. (2014). Empirical investigation on the impact of microcredit on women empowerment in Urban Peninsular Malaysia. Journal of Developing Areas, 48(2), 287–306.
https://doi.org/http://dx.doi.org/10.1016/j.ymgme.2012.10.013
Boucher, S., Guirkinger, C., & Trivelli, C. (2009). Direct elicitation of credit constraints: Conceptual and practical issues with an empirical application to Peruvian agriculture. Working Paper No. 07– 004. Davis: Department of Agricultural and Resource Economics, University of California.
Bougheas, S., Mizen, P., & Yalcin, C. (2006). Access to external finance: Theory and evidence on the impact of monetary policy and firm-specific characteristics. Journal of Banking and Finance, 30(1), 199–227. https://doi.org/10.1016/j.jbankfin.2005.01.002
Dalberg. (2011). Report on support to SMEs in developing countries through financial intermediaries. Dalberg Global Development Advisors.
https://doi.org/10.1017/CBO9781107415324.004
Field, E., Pande, R., Papp, J., & Park, Y. J. (2012). Repayment flexibility can reduce financial stress: A randomized control trial with microfinance clients in India. PLoS ONE, 7(9). https://doi.org/10.1371/journal.pone.0045679
Gibbons, D. S., & Kasim, S. (1990). Banking on the Rural Poor in Peninsular Malaysia. In Center for Policy Research, Universiti Sains Malaysia. Center for Policy Research, Universiti Sains Malaysia.
Hassan, S., Abdul Rahman, R., Abu Bakar, N., Mohd, R., & Muhammad, A. D. (2013). Designing Islamic microfinance products for Islamic banks in Malaysia. Middle-East Journal of Scientific Research, 17(3), 359–366.
https://doi.org/10.5829/idosi.mejsr.2013.17.03.12160
Hill, R. C., Griffiths, W. E., & Lim, G. C. (2011). Principles of Econometrics Fourth Edition.
Khan, A., & Rabbani, A. (2015). Assessing the spatial accessibility of microfinance in Northern Bangladesh: a GIS analysis. Journal of Regional Science, 00(0), 1–29. https://doi.org/10.1111/jors.12196
Khandker, S. R. (2005). Microfinance and poverty: Evidence using panel data from Bangladesh. The World Bank Economic Review, 19(2), 263–286.
https://doi.org/10.1093/wber/lhi008
Li, P. J., & Rouyih, H. (2007). Microfinance in Malaysia (H. W. Mun (ed.)). Malaysian Economics: Issues and Debates; Malaysian Economics Development.
http://www.harwaimun.com/malaysian_economics_development.pdf
Li, X., Gan, C., & Hu, B. (2011). Accessibility to microcredit by Chinese rural households. Journal of Asian Economics, 22(3), 235–246.
https://doi.org/10.1016/j.asieco.2011.01.004
Littlefield, B. Y. E., Morduch, J., & Hashemi, S. (2003). Is microfinance an effective strategy to reach the millennium development goals?? Focus Note. http://ifmr.ac.in/cmf/wp-content/uploads/2007/06/mf-mdgs-morduch.pdf
Mead, D. C., & Liedholm, C. (1998). The dynamics of micro and small enterprises in developing countries. World Development, 26(1), 61–74.
https://doi.org/10.1016/S0305-750X(97)10010-9
Mokhtar, S. H., & Ashhari, Z. M. (2015). Issues and challenges of microcredit programmes in Malaysia. Asian Social Science, 11(26), 191–195.
https://doi.org/10.5539/ass.v11n26p191
Muridan, M., & Ibrahim, P. (2016). Micro financing for microenterprises in Malaysia: A review. In International Business Management (Vol. 10, Issue 17, pp. 3884–3891).
Nawai, N., & Mohd Shariff, M. N. (2011). The importance of micro financing to the microenterprises development in Malaysia’s experience. Asian Social Science, 7(12), 226–238. https://doi.org/10.5539/ass.v7n12p226
Nguyen, N., & Luu, N. T. H. (2013). Determinants of financing pattern and access to formal -informal Credit: The case of small and medium sized enterprises in Vietnam. Journal of Management Research, 5(2), 240–259. https://doi.org/10.5296/jmr.v5i2.3266
Nkundabanyanga, S. K., Kasozi, D., Nalukenge, I., & Tauringana, V. (2014). Lending terms, financial literacy and formal credit accessibility. International Journal of Social Economics, 41(5), 342–361. https://doi.org/10.1108/IJSE-03-2013-0075
SME Corporation Malaysia. (2014). SME Annual Report 2013/14.
http://www.smecorp.gov.my/images/Publication/Annual-report/BI/annual-report-2013.pdf
SME Corporation Malaysia. (2015). SMEs Annual report 2015/16.
http://www.smecorp.gov.my/index.php/en/sme-annual-report-2015-16
Tsukada, K., Higashikata, T., & Takahashi, K. (2010). Microfinance penetration and its influence on credit choice in indonesia: Evidence from a household panel survey. Developing Economies, 48(1), 102–127. https://doi.org/10.1111/j.1746-
1049.2010.00100.x
Tuyon, J., Mohammad, S. J. S., & Ali, R. (2011). The role of microfinance in development of micro enterprises in Malaysia. Business & Management Quarterly Review, 2(3), 47–57.
Winter-Nelson, A., & Temu, A. A. (2005). Liquidity constraints, access to credit and pro-poor growth in rural Tanzania. Journal of International Development, 17(7), 867-882.
Woller, G., & Parsons, R. (2002). Assessing the community economic impact of microfinance institutions. Journal of Developmental Entrepreneurship, 7(2), 133–150. http://www.microfinancegateway.org/gm/document-1.9.28984/49.pdf
In-Text Citation: (Ruslan et al., 2021)
To Cite this Article: Ruslan, R. A. H. M., Gan, C., & Hu, B. (2021). Determinants of Small and Medium Enterprises’ Choice of Microcredit Provider: A Multinomial Logit Approach. International Journal of Academic Research in Business and Social Sciences, 11(11), 673 – 685.
Copyright: © 2021 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode