Credit Quality as a Moderating Effect of Capital Adequacy and Credit Distribution on the Profitability of Village Credit Institutions

Abstract

Profitability is one measure of the achievements of Village Credit Institution (LPD) in managing them so that they can continue to grow and develop amidst increasingly fierce competition between financial institutions. Capital adequacy, loan disbursement, and quality of credit disbursed are several factors that affect LPD profitability. This study uses a qualitative descriptive approach with secondary data sources. The research population is all LPDs in Denpasar City totaling 35 units. Determination of the sample using purposive sampling so that 34 units of LPD were obtained as samples and 170 observational data. The research instrument uses documentation techniques or non-participant observation. Methods of data analysis using descriptive analysis and inferential analysis with moderation analysis for moderated regression analysis. The research results show that Capital Adequacy Ratio has a significant positive effect on Return on Asset. Loan to Deposit Ratio significant positive effect on Return on Asset. Credit quality is able to moderate (weaken) the influence of Capital Adequacy Ratio to Return on Asset. Credit quality is not able to moderate the effect of Loan to Deposit Ratio to Return on. The implication of the research is that this research provides information for LPDs in Denpasar City regarding the influence Capital Adequacy Ratio and Loan to Deposit Ratio to Return on Asset which is moderated by credit quality so that LPD management in Denpasar City can determine future policy directions in order to increase the profitability and progress of LPDs in Denpasar City.