Impact of Interest Rates on Borrowing Decision

Oct 13, 2025 by magicalceylontours.com 8 views

Factors Affecting the Amount of People's Business Credit Loans in Deli Tua District, Deli Serdang Regency, North Sumatra Province

Introduction

In recent years, the People's Business Credit (KUR) program has become a crucial source of financing for small and medium-sized enterprises (SMEs) in Indonesia. The program aims to provide affordable credit to SMEs, enabling them to grow and develop their businesses. However, the success of the KUR program depends on various factors that influence the borrowing decision of SMEs. This study aims to identify and analyze the factors that affect the number of People's Business Credit Loans (KUR) in Deli Tua District, Deli Serdang Regency, North Sumatra Province.

Background

The KUR program was introduced in 2007 to provide affordable credit to SMEs in Indonesia. The program is designed to support the growth and development of SMEs, which are considered a crucial sector in the country's economy. However, the program has faced several challenges, including high interest rates, collateral requirements, and limited access to credit. To overcome these challenges, it is essential to understand the factors that influence the borrowing decision of SMEs.

Methodology

This study used a qualitative approach to collect data from SMEs in Deli Tua District, Deli Serdang Regency, North Sumatra Province. The researchers conducted interviews with SMEs who are speakers and distributed questionnaires to respondents. A total of 70 respondents were selected using the accidental sampling method to obtain relevant information and represent the population.

Results

The results of the study showed that all variables studied - interest rates, collateral, age, education, and experience - simultaneously had a significant influence on the KUR borrowing decision. However, when analyzed partially, only interest rates, collateral, and age are proven to have a significant influence on the decision. Conversely, education and experience of SMEs do not show significant effects.

Analysis of Influence Factors

Interest Rate

Interest rates are the most influential factor in the borrowing decision. The lower the interest rate, the greater the possibility of SMEs to take loans. This is related to the lower costs that must be borne by the borrower. The decline in interest rates also increases KUR's attractiveness as a source of financing.

Impact of Interest Rates on Borrowing Decision: The interest rate is a critical factor in the borrowing decision of SMEs. A lower interest rate can increase the likelihood of SMEs taking loans, as it reduces the costs associated with borrowing.
Effect of Interest Rates on KUR's Attractiveness: The decline in interest rates can increase KUR's attractiveness as a source of financing, making it more appealing to SMEs.

Collateral

The collateral offered by the borrower is also a major consideration. SMEs tend to be more confident to apply for loans if they have assets that can be used as collateral. Collateral provides guarantees for lenders, thus minimizing the risk of loss.

Importance of Collateral in Borrowing Decision: Collateral is a critical factor in the borrowing decision of SMEs. The availability of collateral can increase the likelihood of SMEs taking loans, as it provides a guarantee for lenders.
Role of Collateral in Minimizing Risk: Collateral plays a crucial role in minimizing the risk of loss for lenders. By providing collateral, SMEs can reduce the risk associated with borrowing.

Age

The age factor shows that older SMEs have more experience in running a business. They tend to know more about the risks and benefits associated with loans. Therefore, the bank or financial institution is more likely to provide loans to more experienced borrowers.

Impact of Age on Borrowing Decision: The age of SMEs can influence the borrowing decision. Older SMEs tend to have more experience and knowledge about the risks and benefits associated with loans.
Effect of Age on Loan Provision: The age of SMEs can also influence the likelihood of loan provision. Banks and financial institutions may be more likely to provide loans to more experienced borrowers.

Education and Experience

Although education and experience do not show a significant effect in this study, this does not mean these factors are not important. Good education and adequate work experience can still make a positive contribution to the managerial expertise of SMEs, which in turn can improve their business performance.

Importance of Education and Experience: Education and experience are crucial factors in the development of SMEs. Good education and adequate work experience can improve the managerial expertise of SMEs, leading to better business performance.
Role of Education and Experience in Improving Business Performance: Education and experience can play a significant role in improving business performance. By acquiring knowledge and skills, SMEs can make informed decisions and manage their businesses more effectively.

Conclusion

From the results of research in Deli Tua District, it can be concluded that interest rates, collateral, and age are key factors that influence the decision of SMEs in taking KUR loans. While education and experience, although important, are not proven to have a significant influence in this context. Further research may need to be done to understand other factors that can influence borrowing decisions and to strengthen the KUR program in the future.

Recommendations

Based on the findings of this study, the following recommendations are made:

Interest Rate: The government and financial institutions should consider reducing interest rates to increase the attractiveness of KUR as a source of financing.
Collateral: The government and financial institutions should consider relaxing collateral requirements to increase access to credit for SMEs.
Age: The government and financial institutions should consider providing training and development programs for younger SMEs to improve their managerial expertise and increase their chances of accessing credit.
Education and Experience: The government and financial institutions should consider providing education and training programs for SMEs to improve their managerial expertise and increase their chances of accessing credit.

By implementing these recommendations, the government and financial institutions can strengthen the KUR program and increase access to credit for SMEs in Deli Tua District, Deli Serdang Regency, North Sumatra Province.
Frequently Asked Questions (FAQs) About Factors Affecting the Amount of People's Business Credit Loans in Deli Tua District, Deli Serdang Regency, North Sumatra Province

Q: What is the People's Business Credit (KUR) program?

A: The KUR program is a government initiative aimed at providing affordable credit to small and medium-sized enterprises (SMEs) in Indonesia. The program aims to support the growth and development of SMEs, which are considered a crucial sector in the country's economy.

Q: What are the key factors that influence the borrowing decision of SMEs in Deli Tua District, Deli Serdang Regency, North Sumatra Province?

A: The key factors that influence the borrowing decision of SMEs in Deli Tua District, Deli Serdang Regency, North Sumatra Province are interest rates, collateral, and age. These factors are proven to have a significant influence on the decision of SMEs in taking KUR loans.

Q: What is the impact of interest rates on the borrowing decision of SMEs?

A: The interest rate is a critical factor in the borrowing decision of SMEs. A lower interest rate can increase the likelihood of SMEs taking loans, as it reduces the costs associated with borrowing. The decline in interest rates can also increase KUR's attractiveness as a source of financing, making it more appealing to SMEs.

Q: What is the role of collateral in the borrowing decision of SMEs?

A: Collateral is a critical factor in the borrowing decision of SMEs. The availability of collateral can increase the likelihood of SMEs taking loans, as it provides a guarantee for lenders. Collateral plays a crucial role in minimizing the risk of loss for lenders, by providing a guarantee for the loan.

Q: What is the impact of age on the borrowing decision of SMEs?

A: The age of SMEs can influence the borrowing decision. Older SMEs tend to have more experience and knowledge about the risks and benefits associated with loans. Therefore, the bank or financial institution is more likely to provide loans to more experienced borrowers.

Q: What is the importance of education and experience in the development of SMEs?

A: Education and experience are crucial factors in the development of SMEs. Good education and adequate work experience can improve the managerial expertise of SMEs, leading to better business performance. Education and experience can play a significant role in improving business performance, by acquiring knowledge and skills, SMEs can make informed decisions and manage their businesses more effectively.

Q: What are the recommendations for the government and financial institutions to strengthen the KUR program?

A: Based on the findings of this study, the following recommendations are made:

Interest Rate: The government and financial institutions should consider reducing interest rates to increase the attractiveness of KUR as a source of financing.
Collateral: The government and financial institutions should consider relaxing collateral requirements to increase access to credit for SMEs.
Age: The government and financial institutions should consider providing training and development programs for younger SMEs to improve their managerial expertise and increase their chances of accessing credit.
Education and Experience: The government and financial institutions should consider providing education and training programs for SMEs to improve their managerial expertise and increase their chances of accessing credit.