High Lending Rates in Indonesia: Inflation Rates and Bank Inefficiencies

Abstract

Inefficient banking systems will affect the Indonesian economy resulting in a high lending rate structure which impacts the cost of capital in real sectors. This study aims to determine if the high lending rates in Indonesia are caused by the high inflation rate and bank inefficiencies. Using monthly panel data analysis from four categories of commercial banking in Indonesia for the period January 2009-December 2017, the results of the study show that operating expenses operating income (OEOI) and net interest margin (NIM) factors, as a measure of efficiency, have a positive impact on loan interest rates for working capital loans, investment loans and consumer loans. Furthermore, inflation rate has a positive effect on loan interest rates for working capital and investment loans only. However, this contrasts with consumer credit where the inflation rate has a negative effect on consumer credit rates. This might be attributed to the fact that interest rates for consumer credit consider default risk factors and high demand rather than inflation factors.

Monetary policy effectiveness in Asian developing economies: the moderating role of financial sector development

“…However, the outcome of PMG/ARDL estimator in Table 7 revealed that the impact of inflation on lending rate is positive and significant, which means that a 1% increase in inflation increases the lending rate by 0.275%. This finding is consistent with previous studies by Gomes (2021) for Bangladesh and Christianti (2020) for Indonesia. Table 7 also includes the impact of remittances on the lending rate.…”

Прогнозирование Процентных Ставок И Показателей Срочности В Российской Банковской Системе

“…Получен интересный результат, который состоит в том, что динамика процентных ставок банка статистически никак не связана с его размером. Среди исследований, посвященных моделированию процентных ставок в развивающихся странах, банковские системы которых имеют специфические черты, можно отметить [7] (Иран), [8] (Индонезия), [9] (Пакистан), [10] (Китай). В работе [7] установлена статистическая взаимосвязь между структурой собственности компании и ставкой ее кредитования.…”

“…В работе [7] установлена статистическая взаимосвязь между структурой собственности компании и ставкой ее кредитования. В [8] с помощью эконометрических методов обнаружена статистически значимая связь между показателями эффективности банковской деятельности и ставками. В [9] анализируется влияние пространственного распределения банков на величину ставок -показано, что рост количества отделений банков на данной территории приводит к снижению ставок по кредитам.…”

Efficient Comparison of the Top 10 Largest Commercial Banks in Indonesia: Dea (Data Envelopment Analysis)

“…The role of banks as intermediary institutions in transferring funds from the surplus side to the deficit side plays a very important role in economic growth. Thus, the banking industry must be able to operate efficiently because bank efficiency affects the determination of credit interest rates which can have a direct impact on financing in the real sector (Christianti, 2020). In addition, other benefits of an efficient banking sector are supporting the success of macro policies, maintaining sustainable development that affects economic growth and social welfare (Iršová, 2009).…”