Enhancing Micro, Small, and Medium Credit (MSME) through P2P Platforms in Normal and Tight Banking Liquidity

Abstract

This research aims to obtain empirical verification regarding the effect of peer-to-peer (P2P) lending on banking credit for micro, small, and medium enterprises (MSMEs) by considering loose, according to banking standards (normal), and tight banking liquidity. Separating research samples based on different levels of liquidity is a unique and important study. This is because banking liquidity conditions can influence the behavior and decisions of banking management in determining credit distribution priorities to MSMEs or non-MSMEs, as well as being a consideration in utilizing collaboration with P2P platforms. The data utilized in this research uses panel data from January to December 2022, encompassing 33 provinces in Indonesia, resulting in a total of 396 observations. Hence, the test employs a panel data regression approach. This research shows that P2P loans do not affect MSME banking credit in Indonesian provinces with loose liquidity. In contrast, P2P lending positively affects MSME banking credit in provinces with normal and tight banking liquidity. To the best of the researcher's knowledge, this is the first study to examine the effect of P2P lending on MSME banking credit after COVID-19 involving several situations related to banking liquidity.