The Influence of Internal Factors on the Conventional Rural Banks Profitability in Indonesia Period 2015-2019

Abstract

During 2015During -2019, the number of conventional rural banks in Indonesia decreased from 1637 to 1578. This was followed by a decrease in profitability ratios which were proxied by Return on Assets (ROA). The decrease of profitability potentially endanger the continuity of rural banks business. This study aims to analyze the effect of internal factors consisting of capital, liquidity, efficiency, credit risk, and total assets of conventional rural banks on ROA. The data used is secondary data in the form of the financial ratio of 320 conventional rural banks in Indonesia in 2015-2019. This study uses panel data regression as analysis tool. The panel data regression results show that size (total assets) has a significant positive effect on ROA. Meanwhile, Operational Efficiency Ratio (BOPO) and Non-Performing Loan (NPL) have a significant negative effect on ROA. Capital Adequacy Ratio (CAR) and Loan to deposits Ratio (LDR) have no significant effect on ROA.