Market Bank as Alternative to MSMEs Fund Provider: Lesson of Entrepreneurship from Indonesia

Abstract

Micro, small and medium enterprises in Indonesia are still constrained in obtaining information and access to finance for business development and in supporting their day-to-day business operation. Lack of sufficient collateral and strict, complicated banking administrative requirements, and also lack of information about have constrained the MSMEs in getting government-provided credit facilities. The best and easiest option for the community and the MSMEs in obtaining capital and doing business development is to switch to alternative sources of funding provided by non-banking financial institutions such as Bank Pasar or market bank. The main target of market bank is the low-to-middle class businesses that urgently require a small amount of capital. A borrower can borrow money from a lender who acts as a market bank and provides a loan with high interest without collateral. Bargaining always occurs in this business deal. Market bank operators only have a hand-written diary of their borrower’s interest payments. The persisting practice of traditional market banks amid the pace of development of increasingly innovative banking technology with a wide range of financial products and increasingly sophisticated services, is an interesting study when viewed from an entrepreneurial perspective. Market bank increasingly grows in numbers and have a significant impact to lenders and borrowers. The practice of market bank businesses, that persists and develops as traditional entrepreneurial behavior in Indonesia, have proven that not all traditional business models are eroded by the evolution of business models that continue to change with the demands of the times.