Determinant Factors Of Sme Loan Approval In Indonesia’s Commercial And Islamic Banks
Abstract
The significance of SMEs in advancing a nation's economic development is becoming increasingly evident in the current global landscape. Despite this acknowledgement, SMEs continue encountering significant operational hurdles, particularly in securing external capital. Nevertheless, SMEs have limited access to external financing, such as bank loans, for business expansion, which affects their ability to sustain themselves over the long term. Not all banks are confident regarding SMEs’ repayment, which will further affect bank liquidity to lend in the future. Hence, they are reluctant to lend money to SMEs for their operations. This study aims to analyze the factors influencing loan acceptance for SMEs by commercial and Islamic banks in Indonesia. To investigate and identify the key factors that influence the decision-making processes of financial institutions, thereby explaining the challenges faced by SMEs in Indonesia when obtaining loans from commercial and Islamic banks. This study utilizes bank annual reports as secondary data from 77 banks, 66 Commercial and 11 Islamic banks, and it was analyzed using STATA 18.0 software. The findings indicate a significant link between credit risk and bank size. Significant distinctions exist between commercial and Islamic banks. In the case of commercial banks, liquidity is significantly related to loan approval for SMEs. However, in the case of Islamic banks, the interest rate on reserves is a crucial factor in determining loan approval for SME applicants. Therefore, SMEs must evaluate these critical aspects prior to seeking a loan to enhance the probability of acceptance for business funding.
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Publication Date
01 September 2026
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eBook ISBN
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European Publisher
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Edition Number
1st Edition
Pages
1-1
Subjects
Accounting and Finance, Business and Management, Communication, Law and Governance
Cite this article as:
Hirnissa, M. T., Zariyawati*, M. A., & Farhan-Thaariq, R. P. (2026). Determinant Factors Of Sme Loan Approval In Indonesia’s Commercial And Islamic Banks. In Y. Naoyuki, A. Peng Hwa, & J. Matthes (Eds.), GLY-Upcoming Volume: Innovating Together: The Convergence of Management, Communication, and The Digital Transformation, vol -. European Proceedings of Social and Behavioural Sciences (pp. 1-1). European Publisher. https://doi.org/10.15405/epsbs.2026.09.25