WULAN AGUSTINA RAHAYU
Drs.Ec.I Made Sudana,MS
Loan interest rate of rural bank is the price that must be paid by the debtors to the bank for a loan obtained. It can’t be separated from the influence of external and internal factors. This study aims to determine the determinant of lending rate that reflected the strategies of management in managing its assets and liabilities.
Variables used in this study are bank’s internal factors which include cost of funds, funding structure, efficiency ratio (BOPO), credit risk, capital adequacy ratio, interest margin (spread) and asset share of rural bank in industry. While external factors include economic growth (GDRP) and market interest rate. The populations of study are rural banks in Bank Indonesia Representative Office Region IV and the study period is year 2009-2013 so the method used in this study is panel data regression and the chosen model is fixed effect model.
The result of study shows that the variables that significantly influence loan interest rate are cost of fund, funding structure (inter-bank liabilities), credit risk, interest margin, GDRP and market interest rate. While variables that have a positive influence to loan interest rate are cost of fund, funding structure (third party fund, inter-bank liabilities and capital), capital adequacy ratio, interest margin and market interest rate. The study findings can’t be separated from rural bank characteristics that slightly different with commercial banks, thus affecting difference management decisions and strategies of rural bank.
Referring to the result of study, rural bank’s management is suggested to consider the determinants of lending rate in strategic decision making. While for related authorities (such as Bank Indonesia and Financial Services Authority) are recommended to assign different policies for commercial and rural banks. Future studies could compare the determinants of rural banks’ interest rate in some areas in East Java due to difference characteristics between regions, and combine with the surveys to rural bank’s management.
Keywords : loan interest rate, rural bank, internal factors, external factor