The Effect of The Reference Rate (BI-Rate) on Micro, Small, and Medium Enterprise (MSME) Lending For The Period 2016-2023
Abstract
This study identifies the impact of the Bank Indonesia reference rate (BI-Rate) on MSME lending, amid the significant challenges experienced by MSMEs due to the Covid-19 pandemic and the importance of sustaining MSME growth, as MSMEs are the largest contributors to Indonesia's economic growth. The research employs a panel data regression model with the system Generalized Method of Moment (Sys-GMM) estimation method and aims to determine the effect of the BI-Rate on MSME credit from the second quarter of 2016 to the fourth quarter of 2023. The data used includes individual bank financial statements and macroeconomic variables. The findings reveal that the BI-Rate has a significant negative impact on MSME lending. Every increase in the BI-Rate leads to a decrease in MSME credit disbursement, and vice versa. This research enhances our understanding of the importance of effective monetary instruments in maintaining financial and monetary stability. Additionally, it highlights that banks are less responsive to changes in the BI-Rate, which could be attributed to asymmetric information, an issue that requires special attention from the government and central bank.
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EKOMBIS REVIEW: Jurnal Ilmiah Ekonomi dan Bisnis is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
