Banking Health Indicators and Their Impact on Credit Risk in the Indonesian Banking Sector
Abstract
Credit risk is inherent in the banking sector, as banks extend credit to the public as a primary source of income. Banks supervised by the Financial Services Authority (Otoritas Jasa Keuangan, OJK) are required to prioritize prudential principles, leading the OJK to monitor risk management in banking through the Non-Performing Loan (NPL) ratio. Various factors can contribute to an increase in credit risk for banks. This study aims to analyze banking-related factors and macroeconomic factors that may influence credit risk. The independent variables related to banking include SIZE, ROA, liquidity, bank capital, and asset quality, while the macroeconomic variables include GDP growth, inflation rate, and unemployment rate. The study employs a panel data regression method with a sample of 42 conventional banks listed on the Indonesia Stock Exchange from 2019 to 2023. The results reveal that liquidity and asset quality have a significant positive impact on credit risk, whereas bank capital, GDP growth, inflation rate, and unemployment rate have a significant negative impact on credit risk. Meanwhile, firm size, profitability, and the OEI ratio do not significantly influence credit risk. This research provides insights for financial managers in managing credit risk while considering macroeconomic conditions when making decisions. Additionally, for investors, the findings offer valuable perspectives on the factors to consider when evaluating banking institutions for investment purposes.
Downloads
References
Al-Qudah, Anas Ali, Allam Hamdan, Manaf Al-Okaily, and Lara Alhaddad. 2023. “The Impact of Green Lending on Credit Risk - Evidence from UAE’s Banks.” Environmental Science and Pollution Research 30(22):61381–93. doi: 10.1007/s11356-021-18224-5.
Artenisa, Beka, and Abazi Alili Hyrije. 2023. “The Impact of Economic Growth on Non Performing Loans in Western Balkan Countries.” InterEULawEast 10(2):117–30. doi: 10.22598/iele.2023.10.2.6.
Astrini, Km Suli, Wayan Suwendra, and I. Ketut Suwarna. 2018. “Pengaruh CAR, LDR, Dan Bank Size Terhadap NPL Pada Lembaga Perbankan Yang Terdaftar Di Bursa Efek Indonesia.” Bisma: Jurnal Manajemen 4(1):34–41.
Asyadiah, Nessa, and Nanu Hasanuh. 2023. The Effect of CAR, LDR, and BOPO on NPL on Banks on the Indonesia Stock Exchange. Vol. 7.
Azhar, Halim, and Yeniwati. 2020. “Analisis Determinan Efisiensi Perbankan di Indonesia.” Ecosains: Jurnal Ilmiah Ekonomi dan Pembangunan 9:133–41.
Dang, Thuy Thu, Pham Thanh Truyen, To Thi Hong Gam, and Ai Ngoc Nhan Le. 2024. “Liquidity and Credit Risks: Evidence from Commercial Banks in Vietnam.” Montenegrin Journal of Economics 20(1):7–16. doi: 10.14254/1800-5845/2024.20-1.1.
Fariska, Putri, and Alia Khaerunisa. 2024. “The Moderating Effect of Macroprudential Policies on the Relationship Between the Effectiveness of the Board of Directors in Shaping the Bank’s Risk-Taking Behavior.” Almana : Jurnal Manajemen dan Bisnis 8(2):231–44. doi: 10.36555/almana.v8i2.2478.
Jasman, Jasman, and Etty Murwaningsari. 2022. “Loan Loss Provision Index and Bank Risk: An Empirical Study in Indonesia.” Banks and Bank Systems 17(2):27–36. doi: 10.21511/bbs.17(2).2022.03.
Le, Tu D. Q., and Xuan T. T. Pham. 2021. “The Inter-Relationships among Liquidity Creation, Bank Capital and Credit Risk Evidence from Emerging Asia–Pacific Economies.” Managerial Finance 47(8):1149–67. doi: 10.1108/MF-04-2020-0189.
Lee, Yok Yong, Mohd Hisham Dato Haji Yahya, Muzafar Shah Habibullah, and Zariyawati Mohd Ashhari. 2020. “Non-Performing Loans in European Union: Country Governance Dimensions.” Journal of Financial Economic Policy 12(2):209–26. doi: 10.1108/JFEP-01-2019-0027.
Patiu, Liberty S., and Vivian Eleazar De La. 2024. “Bank-Specific, Industry-Specific, and Macroeconomic Determinants of Credit Risk: Empirical Evidence from the ASEAN5 Banking Sector.” Review of Integrative Business and Economics 13(4):436–53.
Salas, MBelen B., Prosper Lamothe, Enrique Delgado, Angel L. Fernández-Miguélez, and Lucia Valcarce. 2024. “Determinants of Nonperforming Loans: A Global Data Analysis.” Computational Economics 63. doi: 10.1007/s10614-023-10543-8.
Sekaran, Uma, and Roger Bougie. 2017. Metode Penelitian untuk Bisnis. 6th ed. Jakarta: Salemba Empat.
Suhardono, Adhyatma Ndaru, Asnita Simamora, JR. Dwi Mas Sukma Agung, Henny Setyo Lestari, and Farah Margaretha Leon. 2023. “The Effect of Credit Risk and Board Diversity on the Performance of Banks Listed on the Indonesian Stock Exchange.” IJIBE (International Journal of Islamic Business Ethics) 8(2):144–59. doi: 10.30659/ijibe.8.2.144-159.
Trinh, Nga T., and Quan Ai Truong Tran. 2024. “The Impact of Global Economic Policy Uncertainty on Bank Credit Risks and the Moderating Effect of State Ownership: Empirical Evidence from Vietnamese Commercial Bank.” International Journal of Information, Business and Management 16(3).
Yilmaz Kucuk, Şeyma. 2022. “Determinants of Non Performing Consumer Loans for Turkey: ARDL Bounds Testing Approach.” Business, Management and Economics Engineering 20(2):312–28. doi: 10.3846/bmee.2022.16936.
Yudaruddin, Rizky, Bramantyo Adi Nugroho, Mardiany, Zhikry Fitrian, Pebiansyah Hapsari, Yuli Fitrianto, and Eka Nor Santi. 2024. “Liquidity and Credit Risk in Indonesia: The Role of FinTech Development.” SAGE Open 14(2). doi: 10.1177/21582440241245248.
Copyright (c) 2025 Kelvin Pratama, Akmal Sulistomo, Henny Setyo Lestari, Farah Margaretha
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.
