PROFITABILITY DIFFERENCE TEST BETWEEN LOAN AND EQUITY AS FUNDING SOURCES FOR SMALL AND MEDIUM ENTERPRISES (SMEs)

Abstract

This research aims to find out whether there is a difference in the level of profitability as a proxy of business development which is seen from profitability ratios such as NPM (Net Profit Margin), ROA (Return on Asset), and ROE (Return on Equity) between the entrepreneurs of small medium enterprises who receive loan and those who do not propose loan or use their equity to develop their business. The population in this research involved all entrepreneurs producing excellent products in small medium enterprises (SMEs) in Malang, East Java, Indonesia. Research samples were taken randomly, where 100 entrepreneurs stemmed from 50 entrepreneurs who received loan and the other 50 without loan or used their own money (equity) to set or develop their business. Data was obtained from questionnaire and particular document issued by Central Bureau of Statistics (BPS) or cooperative and Small Medium Enterprises (SMEs) in Malang, Indonesia. Data was calculated based on product moment correlation, while hypothesis on respondents who decided to use loan to develop their business and those who did not in relation to profitability was tested by means of chi square. According to the analysis with chi square, it is concluded that there was a difference in the profitability level of small medium enterprises (SMEs) between entrepreneurs who decided to receive loan (95%) and those who used their own money in developing their business, which accounted for 75%. This research was conducted to encourage the growth of Small Medium Enterprises (SMEs), which is believed to play an important role in the economy of Indonesia.