SMALL MEDIUM ENTERPRISE CREDIT RATING FRAMEWORK IN INDONESIA: CASE STUDY IN BANDUNG

• Main Author: RUSTOMO (29014009), INDRIANI
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/28051
• Institution: Institut Teknologi Bandung

Small Medium Enterprises (SME) are important to the economy of many countries including in Indonesia. Credit is one way for SMEs when they need additional fund to keep expand their business. But un-bankable SMEs have to face asymmetric information when they apply credit from banks since banks don’t have better understanding of their credit worthiness. Banks need better understanding of SME’s risk profile. Credit rating is one solution to solve those asymmetric information faced by both banks and SMEs. <br /> <br /> This study proposes a framework for Small Medium Enterprise credit rating in Bandung, and tries to provide SME point of view to banks and financial institutions at what they should pay attention to when considering a credit for a SME. We construct the framework with variables from Indonesian Central Bank SME credit rating framework for ASEAN SMEs, and add other variables that can be used for credit rating model. By using factor analysis, factor extraction shows that there are three factors to be retained for the framework. And factor loadings help us to categorize our variables into those three factors. The result of this research revealed that some variables from Indonesian Central Bank framework and other literatures can be used to conduct SME credit rating in Bandung, but some others are not significant enough for the SME credit rating framework in Bandung.