Bank stability and fintech impact on MSMES’ credit performance and credit accessibility

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The growth of financial technology (fintech) brings happiness to micro, small, and medium enterprises (MSMEs) that banks have denied access to credit. However, this condition has the potential to create a climate of intensified competition in the credit market and threaten banking stability. Therefore, this study examines the impact of banking stability and fintech on credit performance and credit access of MSMEs. This study uses a sample of 46 public commercial banks of the Republic of Indonesia and uses quarterly data from 2010 to 2022. The number of observations used for bank stability variables was 2,392, and for the fintech variables, 921 observations. This research analysis uses the fixed effect model method with robust standard errors. The results show that bank stability and fintech effect MSMEs’ credit performance and their access to credit. This finding encourages the competition-fragility theory. Bank stability reduces nonperforming loans and MSMEs’ access to credit. This indicates that stable banks encourage better MSME loan performance and thus restrict their lending to MSMEs. The existence of fintech is proven to improve MSMEs’ non-performing loans and their access to credit. Fintech that facilitates easy credit causes MSMEs` credit performance at banks to fall, which in turn opens the gate for MSME credit. The implication is that the financial services authority (OJK) needs to tighten further the online lending of fintech companies that have put more burden on MSMEs with high capital costs that can affect the ability of MSMEs to pay bank loan installments.

Acknowledgments
Appreciation is given to the Directorate General of Higher Education, Research and Technology, Ministry of Education, Culture, Research, and Technology, which has provided a fundamental research grant with contract number 182/E5/PG.02.00.PL/2023. Thanks are also given to higher education service institutions (LLDIKTI) Region 6 and the Institute of Research and Community Services (LPPM) Unisnu Jepara Indonesia, which has supported this research.

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    • Table 1. Variable description and measurement
    • Table 2. Descriptive statistics of each industry
    • Table 3. Correlation matrix between variables
    • Table 4. The effect of bank stability and fintech on non-performing loans of MSMEs (FEM robust)
    • Table 5. The effect of bank stability and fintech on MSME Access credit (FEM robust)
    • Conceptualization
      Hadi Ismanto, Purwo Adi Wibowo
    • Data curation
      Hadi Ismanto, Purwo Adi Wibowo, Tsalsa Dyna Shofwatin
    • Formal Analysis
      Hadi Ismanto, Purwo Adi Wibowo
    • Funding acquisition
      Hadi Ismanto
    • Investigation
      Hadi Ismanto, Purwo Adi Wibowo, Tsalsa Dyna Shofwatin
    • Methodology
      Hadi Ismanto, Purwo Adi Wibowo
    • Project administration
      Hadi Ismanto, Tsalsa Dyna Shofwatin
    • Resources
      Hadi Ismanto, Tsalsa Dyna Shofwatin
    • Software
      Hadi Ismanto, Tsalsa Dyna Shofwatin
    • Supervision
      Hadi Ismanto, Purwo Adi Wibowo
    • Validation
      Hadi Ismanto, Purwo Adi Wibowo
    • Visualization
      Hadi Ismanto, Tsalsa Dyna Shofwatin
    • Writing – original draft
      Hadi Ismanto
    • Writing – review & editing
      Hadi Ismanto, Purwo Adi Wibowo, Tsalsa Dyna Shofwatin