Microfinance strategy and its impact on profitability and operating efficiency: evidence from Indonesia
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Received February 10, 2017;Accepted March 30, 2017;Published June 2, 2017
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DOIhttp://dx.doi.org/10.21511/imfi.14(2).2017.05
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Article InfoVolume 14 2017, Issue #2, pp. 51-62
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Cited by1 articlesJournal title: Problems and Perspectives in ManagementArticle title: Positive contribution of the good corporate governance rating to stability and performance: evidence from IndonesiaDOI: 10.21511/ppm.16(2).2018.01Volume: 16 / Issue: 2 / First page: 1 / Year: 2018Contributors: RR. Iramani, Muazaroh Muazaroh, Abdul Mongid
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After the Asian crisis in 1998, Indonesian banking transformed very quickly into more market-oriented banking. This development increased the competition, on the one hand, and pressure to perform better financially, especially after foreign investor taking over the ownership, on the other hand. Some banks transformed their business strategies into a microfinance bank for profit motives. Such strategy jointly results in significant profitability and efficiency. Using SUR regression, it is found that for the profitability equation, the profitability relates to the size of the bank, the loan loss reserve to gross loan (LLRGL), equity ratio (ETA) and fixed asset ratio (FIXASEQ). For operating efficiency (CIR), the result is similar and only the sign is different. Interestingly that for profitability, the microfinance strategy (MFS) is significant, but not for operating cost efficiency. It implies the need for more cost efficient commercial banks entering microfinance business as it will benefit small borrowers in terms of lower interest margin.
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JEL Classification (Paper profile tab)G32
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References35
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Tables4
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Figures0
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- Table 1. Variable, measurement and expected result
- Table 2. Descriptive statistics
- Table 3. Correlation matrix
- Table 4. The SUR regression result
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Service quality, customers’ satisfaction, and profitability: an empirical study of Saudi Arabian insurance sector
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The moderating role of firm size and interest rate in capital structure of the firms: selected sample from sugar sector of Pakistan
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