The Effect of Asset Quality and Financial Performance on Non Performing Loans (NPLs) of Rural Banks in Indonesia

Abstract

The number of Rural Banks in Indonesia continued to decrease during 2015-2019, even when its assets increase positively. Credit is the primary source of income for rural banks, so most assets are placed in lending. However, growth in lending was followed by higher growth in problematic lending so that the level of Non-Performing Loans (NPLs) continued to increase and exceeded the maximum limit set by Bank Indonesia. It indicates that Rural Banks has not worked optimally in Indonesia, especially in facing the credit risks. This study aimed to analyze the effect of assets qualities consisting of total assets and earning assets quality and financial performance consisting of productivity, efficiency, and profitability on NPL over the 2015-2019 periods. This research used secondary data that is a financial report publication published by Otoritas Jasa Keuangan. Research's sample used 320 Rural Banks all over Indonesia selected by purposive sampling method. The data were analyzed with regression data panel. The results showed that total assets did not affect NPL. Earning assets quality had a positive effect on NPL, while productivity, efficiency, and profitability negatively affected NPL.

Influence of Credit Risk Management and Specific Bank Factors on Financial Performance in Publicly Listed Banks

“…Therefore, the average loan interest rate (ALR) has a significant effect on banking financial performance. This is in line with research conducted by (Hamdillah et al, 2021) which states that ALR has a positive effect on banking financial performance.…”

Pertumbuhan Ekonomi: Pengaruh Pembiayaan dan Aset Tetap

“…Namun, penelitian tersebut juga menyoroti pentingnya alokasi yang efisien dari investasi infrastruktur untuk memastikan bahwa manfaatnya maksimal. Beberapa hasil penelitian sebelumnya menunjukan bahwa total asset berpengaruh terhadap pertumbuhan ekonomi (Adha et al, 2020;Zumaidah et al, 2018), namun ada beberapa penelitian berbanding terbalik dimana ditemukan bahwa total asset tidak dapat mempengaruhi pertumbuhan ekonomi (Hamdillah et al, 2020;Rifai et al, 2021).…”

“…Hal ini menunjukan peningkatan total aset pada bank umum dapat meningkatkan jumlah investasi yang akan berpengaruh pada pertumbuhan ekonomi juga akan meningkat (Zumaidah et al, 2018). Namun ada beberapa penelitian berbanding terbalik dimana ditemukan bahwa total asset tidak memiliki pengaruh terhadap pertumbuhan ekonomi (Hamdillah et al, 2020). Selanjutnya penelitian lain menunjukkan bahwa total aset perbankan syariah berdapat negatif dan tidak tidak signifikan pertumbuhan ekonomi di Kalimantan Timur.…”

“…Temuan penelitian ini mendukung penelitian sebelumnya yang menunjukkan bahwa total aset memiliki pengaruh yang signifikan terhadap pertumbuhan ekonomi, sebagaimana tercatat dalam penelitian oleh Adha et al, (2020) dan Zumaidah et al, (2018). Namun, hasil berbeda dengan beberapa penelitian sebelumnya yang menunjukkan bahwa total aset tidak memiliki pengaruh yang signifikan terhadap pertumbuhan ekonomi, seperti yang diamati dalam penelitian oleh Hamdillah et al, (2020) dan Rifai et al, (2021). Perbedaan hasil ini menunjukkan kompleksitas hubungan antara total aset perbankan dan pertumbuhan ekonomi, yang mungkin dipengaruhi oleh berbagai faktor kontekstual dan metodologis.…”

SASRA Prudential Regulations and Financial Performance of Deposit Taking Saving and Credit Co-Operative Societies in Kenya

“…However, the researchers only focussed on small commercial banks in the US. Hamdillah, Purwanto, & Ermawati (2021) state that a substantial risk component of SACCO depends on the quality of its assets because its main task is extending credit to members. Default happens when a debtor breaches the debt contract or fails to pay the loan instalments.…”