Legal Protection in Credit Guarantee Mechanisms for MSME Financing: A Study of Financial Inclusion in Indonesia

Aldehita Purnasanti Maulida; Indah Sri Utari; Dewi Sulistianingsih; Diandra Preludio Ramada; Abu Bakar Munir

doi:10.26740/jsh.v8n2.p500-563

Authors

Aldehita Purnasanti Maulida Faculty of Law, Universitas Negeri Semarang, Semarang, Indonesia https://orcid.org/0009-0006-7169-0565
Indah Sri Utari Faculty of Law, Universitas Negeri Semarang, Semarang, Indonesia https://orcid.org/0000-0001-6847-2846
Dewi Sulistianingsih Faculty of Law, Universitas Negeri Semarang, Indonesia https://orcid.org/0000-0003-4152-0590
Diandra Preludio Ramada Faculty of Law, Universitas Negeri Semarang, Semarang, Indonesia https://orcid.org/0000-0002-7412-7579
Abu Bakar Munir Faculty of Law, Universiti Malaya, Kuala Lumpur, Malaysia https://orcid.org/0000-0002-7412-7579

DOI:

https://doi.org/10.26740/jsh.v8n2.p500-563

Abstract

This study examines how legal protections within credit guarantee mechanisms support MSME financing and strengthen financial inclusion in Indonesia. It addresses the extent to which legal and institutional arrangements can reduce credit barriers, facilitate risk sharing, and expand access to formal financing for MSMEs. Using a socio-legal research approach and a case study method, the study analyses statutory and regulatory frameworks, institutional policies, relevant documents, and the implementation of credit guarantee schemes, particularly in the context of government-supported MSME financing. The findings indicate that legal protection operates not merely as a normative framework but also as an enabling mechanism that facilitates risk distribution between financial institutions and guarantee institutions. Credit guarantee mechanisms reduce perceived credit risk, increase lending confidence, and improve MSMEs’ access to productive financing. The study further finds that the effectiveness of legal protection depends on institutional synergy, regulatory coherence, risk assessment, and adaptive governance. From a theoretical perspective, the findings demonstrate that credit guarantee mechanisms reflect the principles of Law and Development by using law as an instrument to facilitate economic participation and reduce structural barriers to financing. They also embody Welfare State principles by redistributing economic risks and promoting more equitable access to financial resources. The study contributes to the socio-legal literature by conceptualizing credit guarantee mechanisms as a legal-institutional bridge between legal protection, financial inclusion, and inclusive economic development in Indonesia.

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