Internal Company Factors as Determining Variables for Improving Bank Lending

Abstract

This study seeks to examine the main factors, external and internal to the bank, that enhance bank lending. Bank lending is one of the connecting bridges in sustaining society. Internal factors consist of ROA, DPK, and CAR. External factors are economic growth and interest rate of Bank Indonesia. The population of this research consists of traditional commercial banks listed on the IDX over the 2014-2017 period. Samples were chosen by purposive sampling method. This study uses secondary data with 56 samples; data analysis uses multiple linear regression. The findings of the study show that internal factors have a greater impact on increasing bank lending than external factors. The main variable among internal factors that influences increase in bank lending is ROA. DPK is the internal factor with the smallest impact on increasing bank lending. The implication of the study is that determining the bank lending should take more account of CAR, DPK, ROA, BI interest rates, and economic growth in making decisions about the amount of lending. These variables can only have a slight effect on increasing lending, though. Besides, internal factors such as NPL, LDR or non-economic factors also need to be considered in channeling bank credit.

Internal Factors Affecting Commercial Bank Lending: Symmetric and Asymmetric Effects of Macro-Level Data Evidence

“…Meanwhile, CAR positively affects bank loans. These results are consistent with the findings of research conducted by Prawitasari et al (2020) and Polizzi et al (2020) that CAR has a significant positive effect on bank credit provision. These results are also in line with the findings of a study conducted by Miyajima (2020), which found strong evidence that the capital ratio positively affects bank lending.…”

“…According to Kim and Sohn (2017), bank capital positively and significantly affects loans from large banks that maintain adequate liquid assets. Also, according to Prawitasari et al (2020), that CAR positively and significantly affects bank lending. Similarly, Polizzi et al (2020) prove that the capital ratio positively and significantly affects the growth of bank loans.…”

Roles of Capital Adequacy and Liquidity to Improve Banking Performance

“…Because of this, the Bank for International Settlements (BIS) established a framework for measuring capital adequacy for banks in the group of ten (G10) banking industry countries in the world. Capital adequacy standards affect bank performance (Prawitasari, et al, 2020;Ha, 2019;Ezike and Oke, 2013). Capital Adequacy Ratio (CAR) as an indicator of a bank's ability to cover a decline in assets as a result of losses suffered by a bank, the size of the CAR is determined by the bank's ability to generate profits and the composition of funds allocated to assets according to the level of risk.…”