The Effect of Regulatory Environment, Collateral Availability, and High Interest Rates on SMEs’ Access to Financial Services in Batu City

Gerviana Gonsaga (Accounting, Faculty of Economics, University of Tribhuwana Tunggadewi, Malang, Indonesia)
As'adi As'adi (Accounting, Faculty of Economics, University of Tribhuwana Tunggadewi, Malang, Indonesia)
Hermi Sularsih (Accounting, Faculty of Economics, University of Tribhuwana Tunggadewi, Malang, Indonesia)

International Journal of Management and Business
Vol. 3 No. 4 (2026): October

This study investigates the determinants of Small and Medium Enterprises (SMEs) growth in Batu City, East Java, focusing on the regulatory environment, collateral availability, and high interest rates. Using a quantitative approach, data were collected from a sample of 3,944 SMEs operating in the Batu City Department of Industry and Trade. The findings indicate a significant positive relationship between the regulatory environment and collateral availability and access to financial services. High interest rates also have a negative and significant effect on SMEs' access to financial services. However, this study did not find a significant direct effect of external financing on SME growth. The results of this study underscore the importance of fostering strong business networks and creating a supportive regulatory framework to encourage SME development in the region. This study contributes to the existing literature by providing empirical evidence on the drivers of collateral availability in SMEs in West Java and offers insights for policymakers, financial institutions, and SME stakeholders seeking to support access to financial services.