Deconstructing involuntary financial exclusion: A focus on southeast Asian countries Smes

Abstract

When credit ratings and collateral are used as criteria to assess their credit applications in Africa, SMEs face some struggles when applying for credit. To understand deeply about this phenomenon in Southeast Asia, this paper explores the challenges and determinants of credit access. Using data from the World Bank Enterprise Survey (2023), the research examines the roles of collateral, its value, and gender on credit perception, application, and utilization. The results show that SMEs with collateral face fewer credit constraints, but the high value of collateral can hinder credit access due to stringent requirements. Gender bias significantly affects women entrepreneurs, limiting their ability to secure loans, particularly in male-dominated industries. The research also emphasizes the need for government programs to promote financial inclusion, including promoting gender equity in credit evaluation, enhancing asset value transparency, and building credit infrastructure in urban areas. These measures are used to support the expansion of SMEs as well as encourage sustainable economic growth across the region.Moreover, it highlights how important it is to change financial regulations to take into account Southeast Asia's social, cultural, and economic realities in order to promote equitable credit availability.