Abstract

Data from a survey on the utilization of financial services of small and medium size Indonesian firms is used to identify the firm characteristics associated with accessing financial services from formal (regulated) sources. Three decisions are analyzed: choosing to use a service, choosing the service provider, and choosing the delivery channel. Models are estimated for eight choices: five for a financial service selection (loan, ATM card, saving account, checking account, transfer services); one for a provider choice (commercial bank versus other providers for loans), and two for a channel choice (ATM versus visiting a bank branch for accessing savings accounts, and visiting a branch versus other options for making transfers). Our choices were constrained by many options having very low utilization rates and therefore not being good candidates for logit estimation. The results show the importance of relationship banking for accessing loans. Growing firms, as indicated by increasing revenue in the last year, are consistently associated with the utilization of products and channels, such as ATMs, that would save time by reducing trips to the bank branch.

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