Public ownership and local bank lending at the time of the Covid-19 pandemic: Evidence from Indonesia

Abstract

This paper empirically analyzes whether the Covid-19 pandemic has brought about a significant impact on the lending of local banks and whether such impact has been different for public as compared to private local banks. Using panel data from 1344 Bank Perkreditan Rakyat (BPRs) –banks licensed to provide services within only a province's area– in Indonesia, this paper confirms the negative impact that the Covid-19 pandemic has had on local bank lending. This paper also confirms that the impact of the Covid-19 pandemic on lending has been smaller for local banks owned by majority government shareholders than for local banks owned by private shareholders, providing support to the “social” view of government intervention in the banking sector.