Comparative analysis of MSME capital structure in Indonesia before and after the covid-19 pandemic
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Abstract
This study aims to compare the capital structure of MSMEs in Indonesia before and after the COVID-19 pandemic. Using a descriptive-comparative literature review based on secondary data from Statistics Indonesia (BPS), Otoritas Jasa Keuangan (OJK), Bank Indonesia (BI), and the Ministry of Cooperatives and MSMEs, this research finds a significant shift in financing strategies. During the pandemic, MSMEs relied heavily on internal and informal financing, while in the recovery phase, fintech lending and government-supported financing gained prominence. These findings align with pecking order and trade-off theories and indicate the necessity for adaptive financial policies and enhanced financial literacy to strengthen MSME resilience.
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How to Cite
Febriyanti, R. N., Fitriyanti, E., & Sari, N. (2025). Comparative analysis of MSME capital structure in Indonesia before and after the covid-19 pandemic. Indonesia Auditing Research Journal, 14(3), 66–74. https://doi.org/10.35335/arj.v14i3.495
References
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Abel, A. B. (2018). Optimal debt and profitability in the trade‐off theory. The Journal of Finance, 73(1), 95–143.
Ahmadimousaabad, A., Bajuri, N., Jahanzeb, A., Karami, M., & Rehman, S. (2013). Trade-off theory, pecking order theory and market timing theory: a comprehensive review of capital structure theories. International Journal of Management and Commerce Innovations, 1(1), 11–18.
Aldhi, I. F., Suhariadi, F., Supriharyanti, E., Rahmawati, E., & Hardaningtyas, D. (2024). Financial technology in recovery: Behavioral usage of payment systems by Indonesian MSMEs in the post-pandemic era. International Journal of Computing and Digital Systems, 16(1), 1329–1341.
Anggara, B., & Djamaluddin, A. S. (2024). Empowering Entrepreneurs: Financial Strategies for Community-based SME. Golden Ratio of Community Services and Dedication, 4(2), 69–80.
Anjorin, K., Ijomah, T., Toromade, A., Akinsulire, A., & Eyo-Udo, N. (2024). Evaluating business development services’ role in enhancing SME resilience to economic shocks. Global Journal of Research in Science and Technology, 2(01), 29–45.
Budiarto, D. S., Vivianti, E., & Diansari, R. E. (2021). Maintaining the performance and sustainability of MSMEs using e-commerce during the Covid-19 Pandemic. Journal of Economics, Business, & Accountancy Ventura, 23(3), 414–425.
Caiazza, R., Phan, P., Lehmann, E., & Etzkowitz, H. (2021). An absorptive capacity-based systems view of Covid-19 in the small business economy. International Entrepreneurship and Management Journal, 17(3), 1419–1439.
Chen, L.-J., & Chen, S.-Y. (2011). How the pecking-order theory explain capital structure. Journal of International Management Studies, 6(3), 92–100.
Dasaraju, H., Somalaraju, K., & Kota, S. M. (2020). MSMEs in developing economies and their role in achieving sustainable development goals in the context of Covid19: A theoretical exposition. International Journal of Small and Medium Enterprises and Business Sustainability, 5(2), 94–121.
Deb, R., & Baruah, D. (2022). Working Capital Financing for MSMEs in the Pandemic Era: Challenges and Opportunities. SEDME (Small Enterprises Development, Management & Extension Journal), 49(2), 131–140.
DeYoung, R., Glennon, D., & Nigro, P. (2008). Borrower–lender distance, credit scoring, and loan performance: Evidence from informational-opaque small business borrowers. Journal of Financial Intermediation, 17(1), 113–143.
Gomber, P., Kauffman, R. J., Parker, C., & Weber, B. W. (2018). On the fintech revolution: Interpreting the forces of innovation, disruption, and transformation in financial services. Journal of Management Information Systems, 35(1), 220–265.
Hamzat, L., Abiodun, D., & Joseph, A. (2023). Empowering entrepreneurial growth through data-driven financial literacy, market research, and personalized education tool. World Journal of Advanced Research and Reviews, 19, 1692–1711.
Jin, L., & Liu, M. (2024). Unlocking Financial Opportunities: The Substantial Alleviation of Financing Constraints on Small and Micro Enterprises Through Digital Inclusive Finance. Journal of the Knowledge Economy, 1–27.
Kavaarpuo, G., Mintah, K., & Donkor-Hyiaman, K. A. (2024). Financing housing development in an underdeveloped financial market: learning from developers’ financing adaptations? Housing Policy Debate, 34(6), 918–945.
Kennedy, P. S. J. (2021). The Evaluation of National Economic Recovery Program (PEN) Cluster of Micro, Small and Medium Enterprise. Fundamental Management Journal, 6(2), 1–10.
kumar Sahoo, S., Mohanty, A., & Mohanty, P. P. (2025). Strategies for enhancements of MSME resilience and sustainability in the post-COVID-19 era. Social Sciences & Humanities Open, 11, 101223.
Mei, Z., Zhang, J., & Zhou, Q. (2024). The role of government in helping SMEs to access finance: An evolutionary game modeling and simulation approach. PloS One, 19(12), e0315941.
Mittal, V., & Raman, T. V. (2022). Financing woes: estimating the impact of MSME financing gap on financial structure practices of firm owners. South Asian Journal of Business Studies, 11(3), 316–340.
Prajawati, M. I., Munir, M., Natasya, A. A., & Sagena, B. (2022). SME working capital strategy to increase profitability during the Covid-19 pandemic. Journal of Economics, Finance And Management Studies, 5(5), 1244–1249.
Rodriguez, M. (2024). Trade-Off and Pecking Order Theories in Corporate Financing: Insights from Argentina. Journal of Business and Economic Options, 7(4), 23–32.
Sadeli, Y. A. (2025). The Dynamics of Small Business Owners’ Experiences in Managing and Growing Their Enterprises: A Subjective Perspective in Indonesia’s MSME Sector. Journal of Business, Management, and Accounting, 1(3), 129–136.
Saputra, R. M., & Darmawan, H. (2023). Effects Of Urbanization And The Growth Of Micro, Small, And Medium Enterprises (MSMES) As Supports For The Economy Of Indonesia In An Urban Context. Journal of Social Political Sciences, 4(2), 201–214.
Sommer, V. (2021). Multimodal analysis in qualitative research: Extending grounded theory through the lens of social semiotics. Qualitative Inquiry, 27(8–9), 1102–1113.
Soremekun, Y. M., Udeh, C. A., Oyegbade, I. K., Igwe, A. N., & Ofodile, O. C. (2024). Strategic conceptual framework for SME lending: balancing risk mitigation and economic development. International Journal of Multidisciplinary Research and Growth Evaluation, 5(1), 1056–1063.
Utama, S., Yusfiarto, R., Pertiwi, R. R., & Khoirunnisa, A. N. (2024). Intentional model of MSMEs growth: a tripod-based view and evidence from Indonesia. Journal of Asia Business Studies, 18(1), 62–84.
Wang, S. S., Goh, J. R., Sornette, D., Wang, H., & Yang, E. Y. (2021). Government support for SMEs in response to COVID-19: theoretical model using Wang transform. China Finance Review International, 11(3), 406–433.
Abel, A. B. (2018). Optimal debt and profitability in the trade‐off theory. The Journal of Finance, 73(1), 95–143.
Ahmadimousaabad, A., Bajuri, N., Jahanzeb, A., Karami, M., & Rehman, S. (2013). Trade-off theory, pecking order theory and market timing theory: a comprehensive review of capital structure theories. International Journal of Management and Commerce Innovations, 1(1), 11–18.
Aldhi, I. F., Suhariadi, F., Supriharyanti, E., Rahmawati, E., & Hardaningtyas, D. (2024). Financial technology in recovery: Behavioral usage of payment systems by Indonesian MSMEs in the post-pandemic era. International Journal of Computing and Digital Systems, 16(1), 1329–1341.
Anggara, B., & Djamaluddin, A. S. (2024). Empowering Entrepreneurs: Financial Strategies for Community-based SME. Golden Ratio of Community Services and Dedication, 4(2), 69–80.
Anjorin, K., Ijomah, T., Toromade, A., Akinsulire, A., & Eyo-Udo, N. (2024). Evaluating business development services’ role in enhancing SME resilience to economic shocks. Global Journal of Research in Science and Technology, 2(01), 29–45.
Budiarto, D. S., Vivianti, E., & Diansari, R. E. (2021). Maintaining the performance and sustainability of MSMEs using e-commerce during the Covid-19 Pandemic. Journal of Economics, Business, & Accountancy Ventura, 23(3), 414–425.
Caiazza, R., Phan, P., Lehmann, E., & Etzkowitz, H. (2021). An absorptive capacity-based systems view of Covid-19 in the small business economy. International Entrepreneurship and Management Journal, 17(3), 1419–1439.
Chen, L.-J., & Chen, S.-Y. (2011). How the pecking-order theory explain capital structure. Journal of International Management Studies, 6(3), 92–100.
Dasaraju, H., Somalaraju, K., & Kota, S. M. (2020). MSMEs in developing economies and their role in achieving sustainable development goals in the context of Covid19: A theoretical exposition. International Journal of Small and Medium Enterprises and Business Sustainability, 5(2), 94–121.
Deb, R., & Baruah, D. (2022). Working Capital Financing for MSMEs in the Pandemic Era: Challenges and Opportunities. SEDME (Small Enterprises Development, Management & Extension Journal), 49(2), 131–140.
DeYoung, R., Glennon, D., & Nigro, P. (2008). Borrower–lender distance, credit scoring, and loan performance: Evidence from informational-opaque small business borrowers. Journal of Financial Intermediation, 17(1), 113–143.
Gomber, P., Kauffman, R. J., Parker, C., & Weber, B. W. (2018). On the fintech revolution: Interpreting the forces of innovation, disruption, and transformation in financial services. Journal of Management Information Systems, 35(1), 220–265.
Hamzat, L., Abiodun, D., & Joseph, A. (2023). Empowering entrepreneurial growth through data-driven financial literacy, market research, and personalized education tool. World Journal of Advanced Research and Reviews, 19, 1692–1711.
Jin, L., & Liu, M. (2024). Unlocking Financial Opportunities: The Substantial Alleviation of Financing Constraints on Small and Micro Enterprises Through Digital Inclusive Finance. Journal of the Knowledge Economy, 1–27.
Kavaarpuo, G., Mintah, K., & Donkor-Hyiaman, K. A. (2024). Financing housing development in an underdeveloped financial market: learning from developers’ financing adaptations? Housing Policy Debate, 34(6), 918–945.
Kennedy, P. S. J. (2021). The Evaluation of National Economic Recovery Program (PEN) Cluster of Micro, Small and Medium Enterprise. Fundamental Management Journal, 6(2), 1–10.
kumar Sahoo, S., Mohanty, A., & Mohanty, P. P. (2025). Strategies for enhancements of MSME resilience and sustainability in the post-COVID-19 era. Social Sciences & Humanities Open, 11, 101223.
Mei, Z., Zhang, J., & Zhou, Q. (2024). The role of government in helping SMEs to access finance: An evolutionary game modeling and simulation approach. PloS One, 19(12), e0315941.
Mittal, V., & Raman, T. V. (2022). Financing woes: estimating the impact of MSME financing gap on financial structure practices of firm owners. South Asian Journal of Business Studies, 11(3), 316–340.
Prajawati, M. I., Munir, M., Natasya, A. A., & Sagena, B. (2022). SME working capital strategy to increase profitability during the Covid-19 pandemic. Journal of Economics, Finance And Management Studies, 5(5), 1244–1249.
Rodriguez, M. (2024). Trade-Off and Pecking Order Theories in Corporate Financing: Insights from Argentina. Journal of Business and Economic Options, 7(4), 23–32.
Sadeli, Y. A. (2025). The Dynamics of Small Business Owners’ Experiences in Managing and Growing Their Enterprises: A Subjective Perspective in Indonesia’s MSME Sector. Journal of Business, Management, and Accounting, 1(3), 129–136.
Saputra, R. M., & Darmawan, H. (2023). Effects Of Urbanization And The Growth Of Micro, Small, And Medium Enterprises (MSMES) As Supports For The Economy Of Indonesia In An Urban Context. Journal of Social Political Sciences, 4(2), 201–214.
Sommer, V. (2021). Multimodal analysis in qualitative research: Extending grounded theory through the lens of social semiotics. Qualitative Inquiry, 27(8–9), 1102–1113.
Soremekun, Y. M., Udeh, C. A., Oyegbade, I. K., Igwe, A. N., & Ofodile, O. C. (2024). Strategic conceptual framework for SME lending: balancing risk mitigation and economic development. International Journal of Multidisciplinary Research and Growth Evaluation, 5(1), 1056–1063.
Utama, S., Yusfiarto, R., Pertiwi, R. R., & Khoirunnisa, A. N. (2024). Intentional model of MSMEs growth: a tripod-based view and evidence from Indonesia. Journal of Asia Business Studies, 18(1), 62–84.
Wang, S. S., Goh, J. R., Sornette, D., Wang, H., & Yang, E. Y. (2021). Government support for SMEs in response to COVID-19: theoretical model using Wang transform. China Finance Review International, 11(3), 406–433.
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