Investigating the Determinants of Non-Performing Loan: Loan Monitoring As a Moderating Variable


The objectives of the study are: 1) to analyze the effects of Capital Adequacy Ratio (CAR), Credit Risk, Loan to Deposit Ratio (LDR), and Net Interest Margin (NIM) to Non- Performing Loan (NPL); 2) to analyze the role of loan monitoring in moderating the effects of CAR, credit risk, LDR, and NIM on NPL. It was a quantitative study. The subject of the study was the Republic of Indonesia Employee Cooperative (KPRI) which had saving and loan business units. Data were collected by conducting documentation (to collect data on CAR, Credit Risk, LDL, NIM, and NPL) and distributing questionnaires (to collect data on loan monitoring). Then, data were analyzed by moderated regression. The results showed that CAR and NIM did not influence NPL, credit risk and LDR had a positive effect on NPL; Then, loan monitoring moderated the effects of NIM on NPL. However; loan monitoring did not succeed to moderate the effect of CAR, credit risk, and LDR on NPL. Based on the results of the study, the cooperatives engaged in the provision of credit need to consider loan monitoring as a very strategic variable to suppress NPL. Thus; it is suggested for the future research to analyze the effectiveness of loan monitoring system at each loaning institution to suppress NPL.


Keywords: Capital Adequacy Ratio, Credit Risk, Loan to Deposit Ratio, Net Income Margin, Non-Performing Loan.

[1] Abid, L., Ouertani, M. N., & Zouari-Ghorbel, S. (2016). Macroeconomic and bank-specific determinants of household’s non-performing loans in Tunisia: A dynamic panel data. Procedia Economics and Finance, 13, 59–68.

[2] Ahmad, F., & Bashir, T. (2013). Explanatory Power of Bank Specific Variables as Determinants of Non- performing Loans: Evidence from Pakistan Banking Sector. World Applied Sciences Journal, 22(9), 1220–1231.

[3] Alexandri, M. B., & Santoso, T. I. (2015). Non Performing Loan: impact of Internal and external factor evidence in Indonesia. International Journal of Humanities and Social Science Invention, 4(1), 87–91.

[4] Aremu, O.S., Suberu, O.J., Oke, J.A. (2010), Effective credit processing and administration as a panacea for non-performing assets in the Nigerian banking system. Journal of Economics, 29(2), 53-56.

[5] Battaglia, F., Farina, V., Fiordelisi, F., & Ricci, O. (2010). The efficiency of cooperative banks: the impact of environmental economic conditions. Applied Financial Economics, 20(17), 1363–1376. doi:10.1080/09603107.2010.491442

[6] Chen, K. and Pan, C. (2012). An Empirical Study of Credit Risk Efficiency of Banking Industry in Taiwan, Web Journal of Chinese Management Review, 15(1), 1-16.

[7] Coyle, B. (2000). Framework for Credit Risk Management, Chartered Institute of Bankers, United Kingdom

[8] Dermine, J., 2013, “Bank Regulations after the Global Financial Crisis: Good Intentions and Unintended Evil,” European Financial Management 19, 658 - 674

[9] Dhar, S., & Bakshi, A. (2015). Determinants of loan losses of Indian banks: A panel study. Journal of Asia Business Studies, 9, 17–32.

[10] Djiogap, F., & Ngomsi, A. (2012). Determinants of Bank Long-Term Lending Behavior in the Central African Economic and Monetary Community (CEMAC). Review of Economics &Finance. 1923-7529-2012-02-107-08

[11] EL-Maude, J. G., Abdul-Rahman, A., & Ibrahim, M. (2017). Determinants of Non - Performing Loans in Nigeria ’ s Deposit Money Banks. Archives of Business Research, 5(1), 74–88.

[12] Fofack, H. L. (2005). Nonperforming loans in Sub-Saharan Africa: causal analysis and macroeconomic implications. The World Bank.

[13] Gorter, N and Bloem, M (2002). “The macroeconomic Statistics Treatment of NPLs, Publication of the Organization for economic Corporation & Development. http.// adfiap/pdf/nagarajan.pdf

[14] Greenidge, Kevin dan Grosvenor, Tiffany. 2010. Forecasting Non-Performing Loans in Barbados. Research Department, Central Bank of Barbados. Working Paper Tom Adams Financial Centre, Bridgetown, Barbados.

[15] Intrater, M. (2002), Stress Testing the Commercial Loan Portfolio. The RMA Journal, 2002, 35-37. Available from:

[16] Kithinji, A. M. (2010). Credit Risk Management and Profitability of Commercial Bank in Kenya.

[17] Kolapo, T. F., Ayeni, R. K., & Oke, M. O. (2012). Credit Risk And Commercial Banks’performance In Nigeria: A Panel Model Approach. Australian journal of business and management research, 2(2), 31.

[18] Kumar, R. R., Stauvermann, P. J., Patel, A., & Prasad, S. (2018). Determinants of non-performing loans in small developing economies: a case of Fiji’s banking sector. Accounting Research Journal. https: //

[19] Laryea, E., Ntow-Gyamfi, M., & Alu, A. A. (2016). Nonperforming loans and bank profitability: evidence from an emerging market. African Journal of Economic and Management Studies, 7(4), 462–481. https: //

[20] Loizis, P. D., Vouldis, T. A., & Metaxas, V. (2010). The Determinants of Non- Performing Mortgage, Business and Consumer Loans in Greece: Athens. Athen University.

[21] Loizis, P. D., Vouldis, T. A., & Metaxas, V. (2012). Macroeconomic and bank-specific determinants of non- performing loans in Greece: A comparative study of mortgage, business and consumer loan portfolios. Journal of Banking & Finance, 36(4), 1012–1027.

[22] Macit, F. (2012). What Determines The Non-Performing Loans Ratio: Evidence From Turkish Commercial Banks. CEA Journal of Economics, 33–40.

[23] Makri, V., Tsagkanos, A., & Bellas, A. (2014). Determinants of Non-Performing Loans: The Case of Eurozone. Panoeconomicus, 2, 193–206.

[24] Mester, L.J., Nakamura, L.I., Renault, M. (2007), Transactions accounts and loan monitoring. Review of Financial Studies, 20(3), 528-556.

[25] Misra, B.M. dan Dhal, Sarat. 2010. Pro-cyclical management of non-performing loans by the Indian public sector banks. BIS Asian Research Papers.

[26] Nakamura, L.I., Roszbach, K. (2013), Credit ratings and bank monitoring ability ∗ †. Working Paper of Federal Reserve Bank of Philadelphia, 13(21), 1-59.

[27] Nkusu, M. (2011), “Non-performing Loans and Macro-financial Vulnerabilities in Advanced Economies”, IMF WP/11/161, pp. 1-27.

[28] Panta, B. (2018). Non-Performing Loans & Bank Profitability: Study of Joint Venture Banks in Nepal. International Journal of Sciences: Basic and Applied Research, 42(1), 151–165. Diambil dari http://gssrr. org/index.php?journal=JournalOfBasicAndApplied

[29] Petersson, J., & Wadman, I. (2004). Non Performing Loans-the markets of Italy and Sweden.

[30] Radivojevic, N., & Javovic, J. (2017). Examining of determinants of non-performing loan. Prague Economic Papers, 26(3), 300–316.

[31] Ranjan, R., & Chandra, D. S. (2013). Non-Performing Loans and Terms of Credit of Public Sector Banks in India: An Empirical Assessment; India. Reserve Bank of India Occasional Papers, 24(3).

[32] Saada, Moufida Ben. 2019. The impact of control quality on the non-performing loans of Tunisian listed banks. Managerial Auditing Journal, Vol. 33 Issue: 1, pp.2-15.

[33] Shingjergj, A. (2013). The Impact of Bank Specific Variables on the Non Performing Loans Ratio in the Albanian Banking System. Research Journal of Finance and Accounting, 4(7), 148–153.

[34] Skarica, B. (2014), “Determinants of Non-Performing Loans in Central and Eastern European Countries”, Financial Theory and Practice, Vol 38 No.1, pp. 37-59.

[35] Swamy, V. (2012). Impact of Macroeconomic and Endogenous Factors on Nonperforming Bank Assets. International Journal of Banking and Finance, 9.

[36] Treacy, W.F., Carey, M. (2000), Credit Risk rating systems at large US banks. Journal of Banking and Finance, 24(1-2), 167-201.

[37] Valsamakis, A.C., Vivian, R.W. & Du Toit, G.S. 2005. Risk Management: managing enterprise risks. 3rd edition. South Africa: Heinemann Publishers

[38] Wood, A., & Skinner, N. (2018). Determinants of non-performing loans: evidence from commercial banks in Barbados. The Business and Management Review, 9(3), 9–10.