Research on the Profitability of Rural Banks in Indonesia: A Comparative Study

Abstract

BPRs' size, in terms of asset and capital, is substantially smaller than the commercial banks. However, they are playing a significant role in supporting micro and small enterprises. The total number of BPRs today is more than 1,500 units and spread all over Indonesia. One of the most important performance indicators of BPR is profitability. This research is aimed at comparing previous researches on factors affecting the profitability of BPRs. In total, 23 types of research from 2014 to 2021 are gathered and compared. The comparison will embrace the use of analysis tools, dependent and independent variables, and relationships pattern among those variables. The result shows that a multiple linear regression was the most frequent tool of analysis used by researchers in analyzing factors affecting BPR's profitability. The other tool of analysis with a relatively limited utilization was a panel data regression and path analysis. The return on assets (ROA) was identified as the most intensive dependent variable used in representing BPR's profitability. Meanwhile, the capital adequacy ratio (CAR), loan to deposit ratio (LDR), nonperforming loan (NPL), and operating income to operational expenses ratio (BOPO) were the most frequent independent variables used by various studies.