Determinants Of Non-Performing Loans:  An Empirical Investigation Of Bank-Specific Microeconomic Factors

Ikram, Amir; Su, Qin; Ijaz, Faisal; Fiaz, Muhammad

doi:10.19030/jabr.v32i6.9819

Cited by 23 publications

(27 citation statements)

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“…The backbone of corporate governance is agency theory correlated to external factors like macroeconomic risk such as foreign exchange, interest rate, inflation rate, and economic growth. It is one of the main theories to figure corporate governance (Pratiwi, 2016;Ikram et al, 2016;Warrad & Khaddam, 2020). The correlation between macro-risk and corporate governance is in line with the hypothesis, except the relationship between forex and GCG.…”

Section: The Correlation Between Macro-risk and Corporate Governancesupporting

confidence: 73%

The Relationship of Macro-risk Indicators, Internal Factors, and Risk Profile of Islamic Banking in Indonesia

2020

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This study is essential because of Islamic banks have a level of health with higher NPF than conventional banks and purposes to examines whether macroeconomic indicators (macro-risk), internal factors of banking (GCG-earnings-capital ) and risk profile have correlation in term Indonesian Islamic banking. The method used is the correlation analysis involving four macro-risk variables (Forex; BI rate; Inflation and GDP), three GEC variables (GCG; ROA, and CAR) and two risk profile (FDR and NPF). The number of samples of the ten largest Indonesia sharia commercial banks with the 2011-2018 period. We find that macroeconomic indicator is positively correlated to non-performing financing (NPF), the GEC positively correlated to NPF and FDR; GEC negatively correlated to macro-risk indicators, generally. However, some indicators negatively correlated such as GDP-corporate governance, Forex-profitability, GDP-efficiency, BI rate-capital and profitability-NPF. The study proposed implications for managerial to understand the role of relationship of macroeconomic, internal factors and risk profile in Islamic bank lending.

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Section: The Correlation Between Macro-risk and Corporate Governancesupporting

confidence: 73%

The Relationship of Macro-risk Indicators, Internal Factors, and Risk Profile of Islamic Banking in Indonesia

2020

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“…Much of the researches and analyses finding the internal and external factors influence financing qualitiesin Islamic Bank whether in Indonesia and several countries in Asia. Ikram et al (2016), conducted empirical study was undertaken to explore the determinants of non-performing loans (NPLs) of small and medium enterprises (SMEs) sector held by the commercial banks with variable are branch age, duration of the loan, and credit policy were found to be significant determinants of NPLs. The study proposes that bankspecific and SME-specific microeconomic variables directly influence NPLs, while macroeconomic factors act as intermediary variables.…”

Section: Introductionmentioning

confidence: 99%

Determinants of Islamic Bank Non-Performing Financing By Financing Contract (Case Study: Bank BRIsyariah Private Company)

Santoso

Siregar

Hakim

et al. 2019

ijbe

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This study integrates the determinant factors of external and internal factors that affect the Bank BRISyariah Non-Performing Financing (NPF) in the period of Quarter I 2010 to Quarter IV 2017 by using multiple regression analysis. The external variables themselves consist of Inflation Rate, Benchmark Interest Rate/BI Rate, Economic Growth and USD/IDR Exchange Rate while internal factors consist of Return on Assets (ROA), Net Income Margin (NIM), Growth Financing, Financing to Deposit Ratio (FDR), Bank Rating (consisting of Good Corporate Governance, Risk Profile, Profitability and Capital) and NPF Management/NPF handling. Based on this methodology, the results with multiple regression analysis indicate that under existing contracts or financing contracts, the influencing factors are that 1) NPF in murabahah contract is influenced by bank rating -good corporate governance, exchange rate and benchmark interest rate; 2) NPF in ishtisna contract is influenced by bank rating -risk profile, bank rating -good corporate governance, NPF handling and inflation rate; 3) NPF in qardh contract is influenced by bank rating -rentability; 4) NPF in mudharabah/musyarakah contract is influenced by the rate of inflation; 5) NPF in ijarah contract is influenced by bank rating -risk profile, bank rating -good corporate governance, bank rating -rentability, financing growth and inflation rate. This research produces external and internal factors that need to get attention in order to handle non-performing financing based on financing contract better.Abstrak: Penelitian ini mengintegrasikan faktor-faktor penentu berupa faktor eksternal dan internal yang dan Modal) dan Manajemen NPF / Penanganan NPF. Berdasarkan metodologi ini, hasil dengan analisis regresi berganda menunjukkan bahwa berdasarkan akad pembiayaan faktor-faktor yang mempengaruhi non-performing financing adalah 1) NPF pada akad murabahah dipengaruhi oleh tingkat kesehatan bank -tata kelola perusahaan yang baik, nilai tukar dan suku bunga acuan; 2) NPF pada akad ishtisna dipengaruhi oleh tingkat kesehatan bank -profil risiko, peringkat bank -tata kelola perusahaan yang baik, penanganan NPF dan tingkat inflasi; 3) NPF pada akad qardh dipengaruhi oleh tingkat kesehatan bank -rentabilitas; 4) NPF pada akad mudharabah / musyarakah dipengaruhi oleh tingkat inflasi; 5) NPF pada akad ijarah dipengaruhi oleh tingkat kesehatan bank -profil risiko, tingkat kesehatan bank -tata kelola perusahaan yang baik, tingkat kesehatan bank -rentabilitas, pertumbuhan pembiayaan, dan tingkat inflasi. Penelitian ini menghasilkan faktor eksternal dan internal yang perlu mendapat perhatian agar penanganan pembiayaan bermasalah berdasarkan kontrak pembiayaan menjadi lebih baik.Kata kunci: non performing financing, bank syariah, faktor eksternal, faktor internal, akad pembiayaan

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“…Klein (2013) investigates NPL levels in 16 European countries and finds several specific factors affecting NPLs. Ikram et al (2016) in their research finds the lending selection and poor procedures as the main cause of NPLs to surge in Pakistani commercial banks. Louzis, Vouldis, & Metaxa (2012) examine the effect of macroeconomic factors on non-performing loans in the Greek banking sector by categorizing them into consumer, business, and agricultural loans and state that macroeconomic factors have an effect on NPLs.…”

Section: Hypotheses Developmentmentioning

confidence: 97%

Bank-Specific Factors, Regional Economy, and RDBs’ Non-Performing Loans throughout Indonesia

Aruninggar

Rokhim

2018

Jurnal Keuangan Dan Perbankan

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Regional development was directed to achieve national targets by taking into account the potential, aspirations, and development issues in the regions. One of the inclusive work programs in Indonesian Financial Services Sector Master Plan 2015-2019 was to develop regional economic potential by strengthening the function and role of the regional development bank in supporting the regional economy. We analyzed the influence of bank-specific factors and economic conditions of the regions, where headquarters of the regional development bank (RDB) operates, on non-performing loans recorded by RDBs throughout Indonesia. The research conducted at 25 RDBs spread all over Indonesia for six years. The data used panel data regression with the Fixed Effects method due to possibility of region and time differences. We found that bank-specific factors and local economic conditions affect non-performing loans at RDBs. This can be seen from higher bank capitalization and operational inefficiency costs which had stimulated a significant rise in non-performing loans at RDBs, while increasing bank profitability had driven non-performing loans to drop significantly. Furthermore, in the factor of regional economic conditions, gross regional domestic product and inflation in the regions had a significant effect on decreasing level of non-performing loans at RDBs throughout Indonesia.

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Determinants Of Non-Performing Loans: An Empirical Investigation Of Bank-Specific Microeconomic Factors

Cited by 23 publications

References 0 publications

The Relationship of Macro-risk Indicators, Internal Factors, and Risk Profile of Islamic Banking in Indonesia

The Relationship of Macro-risk Indicators, Internal Factors, and Risk Profile of Islamic Banking in Indonesia

Determinants of Islamic Bank Non-Performing Financing By Financing Contract (Case Study: Bank BRIsyariah Private Company)

Bank-Specific Factors, Regional Economy, and RDBs’ Non-Performing Loans throughout Indonesia

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