Factors Affecting the Distribution of Working Capital Credit

A Case Study of Rural Banks in Indonesia

Working Capital is an indicator of the short-term financial position of an organization and is also a measure of its overall efficiency. The growth of working capital credit for BPR in North Sumatra is not only influenced by the better performance of ROA, ROE, BOPO, and NPL, but is also influenced by the condition of the debtor’s business, existing economic conditions, and management’s assessment of the health and risk of BPR. The study aims to determine how much influence the CAR, NPL, BOPO, management assessment, ROA, ROE have on the amount of credit to be distributed by BPRs in North Sumatra, Indonesia. The study employed the time series data of published financial statements of 54 rural banks in North Sumatra from 2016 to 2019 and also employed the Chow and Hausman tests, as well as the general effect and fixed effect model specification tests. The results showed that partially the NPL, BOPO, management assessment, and ROE had a significant effect on the amount of credit to be disbursed by BPR in North Sumatra, while the variables CAR, OEOI, and ROA had a negative effect on the amount of credit to be distributed by BPR in North Sumatra. The findings also suggested that banks with a high ratio of NPL, management assessment, and ROE are more aggressive to control the working capital.