Correspondence Analysis of Indonesian Retail Banking Personal Loans Top Up

Andrie Agustino,Bagus Sartono,Ujang Sumarwan

doi:10.17358/ijbe.4.1.37

Abstract

Customer experience can be developed through good database management, and this is an important thing to do in the era of tough retail banking competition especially in the personal loan market competition. Through good database management, banks can understand the transaction pattern and customer behavior in each bank service’s contact point. This research aimed at identifying the personal loans correspondence between socioeconomic variables and top up transaction by using the secondary data from one of Indonesian retail banking. The research method used the correspondence analysis and regression. The result of the research showed that the socioeconomic factors that influenced the debtors to top up personal loans at the confidence level of 5% (0.05) included Age, Marital Status, Dependent Number, Living Status, Education, Region, Job Type, Work Length, Salary, Debt Burdened Ratio (DBR), Credit Tenure, and Credit Limit, and only Gender had no effect on personal loan top up. The socioeconomic factors that were close correspondence with the personal loan top up transactions included bachelor degree, State-Owned Enterprises and goverment civil servant employee, income starting from Rp 5 million, credit period starting from 4 years, dan credit limit starting from Rp 50 million. The findings in this study are expected to be useful for marketers of the banks in developing personal loan products and also in preparing a more targeted marketing strategy so that it becomes more effective and efficient for the banks. In addition, the expected implication is that the customer experience will be better because the product developed will be more customer centric. Keywords: bank, correspondence analysis, personal loans, regression, top up

Highlights

Consumer banking in Indonesia has grown rapidly in the last 20 years, especially in the last 5 years, and this is because the consumer sector provides stability and good resistance to crisis or economic pressures compared to other business areas
The result of the research showed that the socioeconomic factors that influenced the debtors to top up personal loans at the confidence level of 5% (0.05) included Age, Marital Status, Dependent Number, Living Status, Education, Region, Job Type, Work Length, Salary, Debt Burdened Ratio (DBR), Credit Tenure, and Credit Limit, and only Gender had no effect on personal loan top up
The dummy variables that had close correspondence with top up transactions included undergraduate (X6D), salary from IDR 5 million (X10B), credit tenor starting from 4 years (X12B), and credit limit starting from IDR50 million (X13B)

Summary

Introduction

Consumer banking in Indonesia has grown rapidly in the last 20 years, especially in the last 5 years, and this is because the consumer sector provides stability and good resistance to crisis or economic pressures compared to other business areas. High expectation on the margin of consumer credit, especially personal loans, makes banks in Indonesia (local and foreign) compete to offer personal loans with various features, such as large credit limit up to IDR500 million, credit tenor up to 10 years, credit interest starting from 0.70% flat/month, simple document requirements and fast credit process of maximum 3 working days (BBRI, 2016). The total portfolio of personal loans in December 2016 based on the Financial Services Authority (OJK) data and from the financial statements of several Indonesian retail banks as shown in Table 1 above was IDR 468.2 trillion with the largest market share of personal loans was Bank Rakyat Indonesia of IDR78.20 trillion (16.70%), and the second largest was Bank Mandiri of IDR17.44 Trillion (3.72%). That the top 2 banks’ market share that did not reach 50% had proved that many competitors participated in the personal loans field due to the expectation of high yield and margin from this loan product (BI, 2007)

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Conclusion