The findings are important because KUR has a dual role in Indonesia’s financial system. It is both a banking product and a public policy instrument designed to expand access to financing for MSMEs. The program provides subsidized financing intended to help businesses obtain working capital and support productive economic activities. State-owned banks, including BRI, BNI, Bank Mandiri, and BTN, are among the major KUR distributors.
Why More KUR Does Not Necessarily Mean More Bank Profit
From a banking perspective, lending can generate interest income and expand productive assets. However, KUR has relatively low interest rates because of government support. As a result, larger lending volumes do not necessarily produce proportionally larger profits.
The researchers also point out that bank profitability depends on more than lending volume. Credit quality and operational efficiency can influence how effectively a bank converts its assets into profits. In the study, these factors were represented by NPL and the ratio of operating expenses to operating income, known as BOPO.
This distinction is particularly relevant for KUR because the program is designed not only to serve commercial banking interests but also to improve access to financing for communities and MSMEs.
How the Study Was Conducted
Putri and Fisabilillah analyzed secondary data from the annual reports of four state-owned banks covering 2017–2024. The sample consisted of BRI, BNI, Bank Mandiri, and BTN, selected because they are state-owned banks with complete data and KUR distribution activities.
The researchers compared the banks across different years using panel-data regression. In simple terms, this approach allowed them to examine both differences between banks and changes within each bank over time.
The analysis measured profitability using Return on Assets (ROA). KUR distribution served as the main variable, while NPL and BOPO were included to account for credit risk and operational efficiency. Statistical tests were then used to determine whether each factor had a meaningful relationship with profitability.
Key Findings
The results produced several important findings:
- KUR distribution had a negative but statistically insignificant relationship with ROA. Its probability value was 0.1151, above the 0.05 significance threshold. This means higher KUR distribution was not shown to significantly increase or decrease profitability during the study period.
- NPL had a negative and statistically significant effect on ROA. Its probability value was 0.0000, indicating a strong relationship between higher levels of problematic loans and lower bank profitability.
- BOPO had a negative but statistically insignificant relationship with ROA. The probability value was 0.0817, meaning its individual effect did not meet the study’s significance threshold.
- KUR, NPL, and BOPO were jointly significant. The F-statistic was 60.81964 with a probability value below 0.05, indicating that the three variables together were significantly associated with bank profitability.
- The model produced an R-squared value of 93.58 percent, meaning the three variables explained a large share of the variation in ROA within the model.
The strongest individual finding concerned NPL. The regression coefficient for NPL was -0.665525, indicating that increases in non-performing loans were associated with lower profitability. The researchers connect this relationship to reduced interest income and increased provisions for potential credit losses.
Credit Quality Matters More Than Volume Alone
The results challenge the assumption that expanding subsidized credit automatically improves bank financial performance. Although KUR can expand a bank’s productive lending portfolio, its contribution to profitability depends on other conditions.
Putri and Fisabilillah explain that the absence of a significant KUR effect may be related to the program’s social and empowerment functions. Because KUR is designed to improve public access to MSME financing and is supported by government interest subsidies, the benefits of distributing more KUR may not appear directly as higher bank profits.
In practical terms, banks cannot rely solely on increasing the amount of credit they distribute. They also need to ensure that borrowers can repay their loans and that lending remains financially sustainable.
For policymakers, the findings suggest that KUR performance should not be judged only by the amount of financing distributed or its effect on bank profits. The program also has a broader public objective: strengthening MSME access to finance and supporting productive economic activity.
For banks, meanwhile, controlling bad loans remains critical. A growing loan portfolio can become a financial burden if credit quality deteriorates.
Implications for Banking and MSME Policy
The study reinforces the importance of balancing three elements of banking activity: credit expansion, risk management, and operational efficiency.
Putri and Fisabilillah from Universitas Negeri Surabaya argue, in essence, that bank profitability is shaped not simply by the amount of KUR distributed but by the interaction between financial intermediation, credit risk management, and operational efficiency.
This perspective is relevant for regulators such as the Financial Services Authority (OJK) and Bank Indonesia. Monitoring credit quality and encouraging prudent banking practices can help ensure that expanded MSME financing does not undermine financial stability.
The researchers also acknowledge that their analysis is limited to four state-owned banks and the 2017–2024 period. Future research could include regional development banks and private banks that distribute KUR, as well as broader macroeconomic factors such as inflation, interest rates, economic growth, and exchange rates.
Author Profiles
Sovia Sugianti Putri is the lead author of the study and is affiliated with the Economics program, Faculty of Economics and Business, Universitas Negeri Surabaya, Indonesia. The article identifies her as the corresponding author. The available journal text does not state an academic degree or a more specific professional field beyond her Economics affiliation.
Ladi Wajuba Perdini Fisabilillah is the second author and is also affiliated with the Economics, Faculty of Economics and Business, Universitas Negeri Surabaya. The available article text does not provide an academic degree or more detailed biography for the author.
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