Determinants of Credit and Financing Risk: Evidence of Dual Banking System in Indonesia

<p><em>Given the fact that banking is the backbone of the Indonesian economy with a dual banking system. This paper seeks determinants of default rate in Indonesia. Various techniques of econometric tools such as unit root, co-integration test and Impulse Response Function (IRF) utilized. Bank capital has similar influence on the own credit or financing risks. Overall economic performance has a different result to the risk. Among the recommendations are for the government to maintain economic performance to keep default rate as low as possible. Financing Deposit Ratio-based Reserve Requirement policy (which is adopted only in Indonesia) imposed by the central bank seems to be effective in developing the real sector and should adopt in conventional banks.</em></p><p>DOI: <a href="http://dx.doi.org/10.15408/aiq.v10i1.5903">10.15408/aiq.v10i1.5903</a></p>

Abstract licence: CC BY-SA

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