Authors: Sigit S. Wibowo
Addresses: Department of Management, Faculty of Economics and Business, Universitas Indonesia, Depok, 16424, Indonesia
Abstract: This study considers how credit constraints come to exist and how to identify them. Credit constraints may arise from market mechanisms: the demand for loans and the supply of loans. In order to assess credit constraints, I use direct elicitation methodology and then examine the gathered information and other household characteristics by applying a multinomial logit model. Using an access-to-finance survey conducted by the World Bank, I find that Indonesian households are likely to experience supply-side constraints rather than demand-side constraints. I also find that financial literacy plays a vital role in accessing services from formal financial institutions. I estimate welfare loss by elaborating several types of constraints: households constrained because of risk-related reasons experience a loss in annual income of between Rp 16 million and Rp 19 million.
Keywords: access to finance; A2F; credit constraints; direct elicitation methodology; DEM; Indonesia.
International Journal of Governance and Financial Intermediation, 2018 Vol.1 No.1, pp.59 - 81
Received: 15 Nov 2016
Accepted: 15 Mar 2017
Published online: 02 May 2018 *