Data Sources and Data Description

4.5.1

Description of the Study Area

The target population is SMEs in Malaysia. The criteria to decide whether an enterprise is or is not an SME are based on the enterprise’s sales turnover and number of employees. The study chose SMEs in Terengganu (East Coast of West Malaysia) as the sampling frame for the following reason. The study selects Terengganu as the study sample site because Terengganu exhibits a relatively higher incidence of poverty and is a less developed region among the states in Malaysia. The top two microcredit institutions (Amanah Ikhtiar Malaysia and TEKUN) operate in the state. In addition, there are many SMEs operating in Terengganu and it is relatively easy to obtain the data related to SMEs and microcredit. In 2017, there are 29, 324 SMEs in operating Terengganu (SME Corporation, 2017).

Since the questionnaire requires knowledge from respondents about their enterprise’s accessibility

to finance, we approached the financial manager or owner to complete the questionnaire.

Considering the limited budget, time and practical difficulties in obtaining the list of and information about the targeted population, the study uses convenience sampling to select the sampling units. The results from the survey, therefore, cannot be interpreted beyond the sample (Zikmund, Babin, Carr, & Griffin, 2010).

4.5.2

Sample Size

The formula formulated by Cochran (2007) was used to determine the sample size. The formula is calculated as follows:

(4.38) Where:

n is sample size;

z2 _{is the abscissa of the normal curve that cuts off an area at the tails;}

0





z pq

n

e

=

88 e is the desired level of precision;

p is the estimated proportion of an attribute that is present in the population; and q is 1-p.

This study uses a 95% (or ±5% precision) level of confidence and assumes p = 0.5, q = 0.5.

Based on the formula in equation (4.38), the desired sample size is 385. However, to avoid sample attrition, the sample size must be larger than the calculated sample responses required. In practice, the working sample size was 600 to obtain sufficient, completed responses for analysis; the actual sample used for the empirical analyses was 498 responses.

4.5.3

Survey Instruments

A structured questionnaire was developed to obtain the data for analysis. The survey questionnaire was submitted to the Lincoln University Human Ethics Committee for approval concerning the confidentiality of data, especially because financial and accounting information of businesses is revealed. Before being distributed to the owner or manager of SMEs in Terengganu, the

questionnaire was translated into Bahasa Malay to make it easier for respondents to comprehend the questions. The survey was administered from February to March 2016. A total of 600

questionnaires were administered to the SMEs, and 596 responses were received. Of the 596 responses, 98 SMEs were eliminated as unusable due to inadequate information. The overall response rate for this study was 83.6% (498 useable responses). The responses are divided into two categories namely microcredit borrowers consist of 386 respondents and non-borrowers consist of 112 respondents.

The survey questions are based on the literature and the objectives of the study. The structured questionnaire comprises the following sections and information:

1) Finance information of SME businesses 2) Microcredit borrowers

3) Non-borrowers

4) Characteristics of the SME

89 The five sections of the structured questionnaire are as follows: Section one is designed to identify to which group a SME belongs – either microcredit borrower or non-borrower. Section two is designed

to obtain information about microcredit borrowing especially the microloan’s characteristics. Section three is designed for non-borrowers in which the survey queries the reasons for not borrowing and seeks their likelihood of borrowing in the future. Section four focuses on the characteristics of the business, including years of establishment, sector in which the SME operates, ownership type, and performance indicators. To capture the performance of the SMEs, the annual total sales and

numbers of full time workers in 2012 and 2014 were requested. Section five covers the profile of the

SME owner’s characteristics, such as age, ethnicity, marital status, educational level, and experience.

The survey questionnaire is included in the Appendix B.1.

4.6

Chapter Summary

Different econometric approaches have been discussed and the data specifications used to answer the research objectives of this study have been described. The first section illustrates the conceptual framework on accessibility to credit and the empirical model applied to determine the key factors

influencing the SMEs’ accessibility to microcredit.

The SMEs choice of microcredit provider is evaluated using multinomial logit approach since there are three alternatives which are microfinance institutions, commercial banks and development financial banks. The microfinance institution is used as a base reference or reference against which the other choices are compared. The OLS were conducted to evaluate the determinants of the financing rate charged on microcredit.

In this study, SMEs’ performance is measured by sales and employment growth. To evaluate the

impact of microcredit on SMEs’ performance, the propensity score matching method and the difference-in-difference method were used with the expectation that these approaches can mitigate the selection bias issue arising from observable and unobservable factors. Further, this study

described the ESR model used to address the endogeneity issues.

This study used primary data collected through a structured questionnaire distributed to SMEs in Terengganu, Malaysia with the response rate of 83.6% (498 SMEs of which 386 are microcredit borrowers and 112 are non-borrowers).

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