Abstract
<p>This research aims to measure and compare the moral hazard behaviour of micro and small enterprises’ debtors within Purwokerto area on Productive Business Loan scheme. This scheme was choosen because of the highest Non Performing Loan (NPL) among others. The data were collected from 127 debitors by using simple random sampling technique. Rating scale method was used to measure the moral hazard behaviours of debtors through questionnaire and later comparing them to study how serious the noncompliance rate in repaying off their credits. This research finds that (1) Generally, the moral hazard behaviour tends to be medium-to-high, (2) The highest moral hazard should be attributed to debitors in Purbalingga followed by those in Banjarnegara, Purwokerto, and Cilacap. Then, it suggests that (1) all bank branches need to pay more attentions to their debitors because their moral hazard behaviours have been medium-to-high. (2) Each branch needs to apply specific treatments to the debitors to improve debitors’ installments, i.e building lending relationship as one way of exploring soft information which emphasizes informal approaches, (3) It should be important to design integrated training and practices for bank officers in order to build up their sense of psychological skills in public relationship in order to handle, in turn, those risky debtors.</p>
Highlights
Asymmetric information often happens in monetary field including funding-lending system in financial institutions, e.g. banks
(2) Each branch needs to apply specific treatments to the debitors to improve debitors’ installments, i.e building lending relationship as one way of exploring soft information which emphasizes informal approaches, (3) It should be important to design integrated training and practices for bank officers in order to build up their sense of psychological skills in public relationship in order to handle, in turn, those risky debtors
RESEARCH METHOD This study focuses in analyzing moral hazard attributed to kredit Usaha Produktif (KUP) debitors of micro and small enterprises (MSEs)
Summary
Asymmetric information often happens in monetary field including funding-lending system in financial institutions, e.g. banks The impact of this condition is most likely the presence of adverse selection and/or moral hazard by the bank or the debtor or both parties. Some experiences found that financing micro and small enterprises (MSEs) has more difficulties rather than the largers because of the lack of information and historical data of their business the presence of asymmetric information is totally convinced. The indication of asymmetric information presence could be appeared through non performing loan (NPL) measure It values the debitors noncompliance of credit contract where the postponed installments was happened that indication must be observed what the causes are; some evidences showed that the causes might be come from debitors’ moral hazard through their attempt not to obey some items in credit contract (Nicholson & Snyder, 2012)
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