Abstract
Indonesia is a developing country with the fourth largest population in the world. Household consumption is still the main pillar of national economic growth in Indonesia. One sector that has an important role in national economic growth is banking. Bank carries out an intermediary function that directly or indirectly can encourage the real sector. A credit card is one of the banking products that can encourage growth in household consumption to support the growth of the real sector. However, on the other hand, the credit card is an unsecured consumer loan. This indicates the bank will have a greater percentage of losses than other types of credit if the borrower default. Therefore, the growth of credit card business must be balanced with good credit quality for the safety and soundness of the banking sector. Credit quality can be measured using a Non-Performing Loan (NPL) that reflects credit default risk. This study aimed to analyze the impact of the macroeconomic condition on credit card default which is proxied by credit card NPL ratio. NPL data obtained from Indonesia's biggest private bank with cardholders that are widespread on every island and have average card growth, transaction value, and outstanding credit card were above the national average. ARDL Cointegration model is used to determine macroeconomic variables that significantly affect credit card NPL. This study was found that exchange rate and interest rate variables partially have a significant influence on the credit card NPL in the long-term. ARDL model can be used as an early warning indicator of the condition of Bank credit card NPL if there is a shock to macroeconomic variables and the model can be used to improve the feasibility analysis tool for new cardholders (credit scoring system) and an indicator of behavior scoring system for existing cardholders.
Highlights
Indonesia is a developing country with the fourth largest population in the world (264,2 million in December 2018)
Analysis of macroeconomic factors that affect credit card Non-Performing Loan (NPL) uses an independent variable consisting of Consumer Prices Index (CPI), Bank of Indonesia (BI) Rate (BIR), IDR Exchange Rate against US Dollar (EXH), Industrial Production Index (IPI), and Jakarta Stock Price Index (IHG)
Stability Test The method used to test the stability of the model is the Cumulative Sum (CUSUM) of Recursive Residuals and CUSUM of square (CUSUMSQ) [17]
Summary
Indonesia is a developing country with the fourth largest population in the world (264,2 million in December 2018). Indonesia's Gross Domestic Product (GDP) in 2018 increased 8.85% from the previous year to IDR 3,798,675 billion. Until December 2018, household consumption is still the main pillar of national economic growth (55.7% of Gross Domestic Product). One sector that has an important role in national economic growth is banking. Bank carries out an intermediary function that directly or indirectly can encourage the real sector. A credit card is one of the banking products that can encourage growth in household consumption to support the growth of the real sector. The value of credit card transactions in 2018 grew by 5,55% from the previous year. This is in line with the positive growth in household consumption and the national economy
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: International Journal of Finance and Banking Research
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
