The Impact of banking credit to micro, small, and medium enterprises on the riskiness of commercial banks in Indonesia based on ownership
The Micro, Small and Medium Enterprises (MSME) sector is crucial for economic and social development of both developed and developing countries, including Indonesia. Therefore, Indonesian government issued the regulation for the commercial banks to increase loan facilities to the MSMEs. However, several previous studies found that loan growth leads to an increase in default risk of the financial institutions. For that reason, this study aims to investigate the impact of loan growth disbursed to the MSMEs on the risk of each commercial bank in Indonesia based on the type of ownership. Multiple Regression Analysis and various model testing were conducted as the methods of this research. All of data were obtained from Indonesian Banking Statistics issued monthly by Financial Services Authorities (OJK) for the period of 2013 until 2018. The results show that loan growth has a significant impact on the main indicator of risk for all types of commercial banks. This finding can be taken as consideration by commercial banks and the government to determine whether any inquiries are needed to minimize the risk along with the increase in micro credits.
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