THE INFLUENCE OF COMMERCIAL BANK PERFORMANCE ON MSME CREDIT DISTRIBUTION IN INDONESIA: A TIME-SERIES ANALYSIS 2014–2023

Abstract

Amid efforts to promote inclusive economic growth, the strategic role of commercial banks in supporting Micro, Small, and Medium Enterprises (MSMEs) is increasingly vital. Although MSMEs contribute significantly to Indonesia’s GDP, their access to bank financing remains limited. From 2014 to 2023, MSME credit distribution showed an upward trend, yet several barriers persist—many of which are tied to internal banking performance.

This study analyzes the influence of Return on Assets (ROA), Loan to Deposit Ratio (LDR), Net Interest Margin (NIM), and Capital Adequacy Ratio (CAR) on MSME loan distribution in Indonesia. Using time series data from the Financial Services Authority (OJK) and applying multiple linear regression, the findings reveal that NIM negatively affects MSME lending, while CAR contributes positively. ROA and LDR show no statistically significant impact. Together, the four indicators have the potential to influence MSME credit distribution, underscoring the critical role of internal bank performance in financial intermediation.

The results suggest that banks should manage interest efficiency without restricting access to credit. Regulators are encouraged to promote more inclusive policies that empower banks with strong capital buffers to support MSME financing.