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Impact of Macroeconomic Condition on Credit Card Default in Emerging Economy: Empirical Evidence from Indonesia
Wahid Achsan,
Noer Azam Achsani,
Bayu Bandono
Issue:
Volume 6, Issue 3, June 2020
Pages:
37-43
Received:
27 March 2020
Accepted:
29 April 2020
Published:
15 May 2020
Abstract: Indonesia is a developing country with the fourth largest population in the world. Household consumption is still the main pillar of national economic growth in Indonesia. One sector that has an important role in national economic growth is banking. Bank carries out an intermediary function that directly or indirectly can encourage the real sector. A credit card is one of the banking products that can encourage growth in household consumption to support the growth of the real sector. However, on the other hand, the credit card is an unsecured consumer loan. This indicates the bank will have a greater percentage of losses than other types of credit if the borrower default. Therefore, the growth of credit card business must be balanced with good credit quality for the safety and soundness of the banking sector. Credit quality can be measured using a Non-Performing Loan (NPL) that reflects credit default risk. This study aimed to analyze the impact of the macroeconomic condition on credit card default which is proxied by credit card NPL ratio. NPL data obtained from Indonesia's biggest private bank with cardholders that are widespread on every island and have average card growth, transaction value, and outstanding credit card were above the national average. ARDL Cointegration model is used to determine macroeconomic variables that significantly affect credit card NPL. This study was found that exchange rate and interest rate variables partially have a significant influence on the credit card NPL in the long-term. ARDL model can be used as an early warning indicator of the condition of Bank credit card NPL if there is a shock to macroeconomic variables and the model can be used to improve the feasibility analysis tool for new cardholders (credit scoring system) and an indicator of behavior scoring system for existing cardholders.
Abstract: Indonesia is a developing country with the fourth largest population in the world. Household consumption is still the main pillar of national economic growth in Indonesia. One sector that has an important role in national economic growth is banking. Bank carries out an intermediary function that directly or indirectly can encourage the real sector....
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Impact of Foreign Aid on Economic Growth of Nepal: An Empirical Evidence
Christina Pradhan,
Ram Kumar Phuyal
Issue:
Volume 6, Issue 3, June 2020
Pages:
44-50
Received:
24 February 2020
Accepted:
20 April 2020
Published:
28 May 2020
Abstract: This paper examines the impact of foreign aid on economic growth in Nepal by considering time series data of the last forty years from 1975/76 to 2015/16. Foreign aid's impact on Nepalese economy was explored with Gross Domestic Product (GDP) as the dependent variable against few selected independent variables such as foreign aid, remittance, investment, labor force and lagged GDP. The study used partial adjustment model to analyze the impact of foreign aid on economic growth and further applied Chow test to examine whether there is a structural breakthrough in the economy. The results indicate that foreign aid has a positive relationship with GDP. However, the relation is not significant since higher volume of foreign aid seems to be used in humanitarian and social welfare rather than production activities in the real sectors. From the Chow test, it was found that foreign aid- GDP relationship has not undergone a structural breakthrough in Nepal over the last forty years' period. In light of such empirical findings, it is suggested to the government policy makers to allocate the foreign aid on productive sectors and human capital formation activities with special focus on capital expenditures to achieve the high rate of economic growth in order to meet the periodic plan and long term development goals.
Abstract: This paper examines the impact of foreign aid on economic growth in Nepal by considering time series data of the last forty years from 1975/76 to 2015/16. Foreign aid's impact on Nepalese economy was explored with Gross Domestic Product (GDP) as the dependent variable against few selected independent variables such as foreign aid, remittance, inves...
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Efficacious Scrutinizing of COVID-19 Impact on Banking Using Credit Risk Metrics
Issue:
Volume 6, Issue 3, June 2020
Pages:
51-56
Received:
15 May 2020
Accepted:
28 May 2020
Published:
4 June 2020
Abstract: COVID-19 (coronavirus disease 2019) pandemic has affected the length and breadth of various industries and banking is one of the most distressed sectors. The main objective of the paper was to manifest the influence of COVID-19 on the credit exposure of a bank. Conventional risk management of a bank is having its business intelligence dashboard to monitor credit exposure and make vital decisions based on it. But because of uncertainty like an epidemic, COVID-19, those visualizations/information fail to convey the impact of an epidemic on the business of a bank and create a gap, which in turn hurts the institution being not able to make accurate and strategic decisions. To bridge that gap, this study uses a statistical technique - Multivariate analysis of variance to choose and find out risk metrics for a bank which has a significant impact because of COVID-19 and developed a COVID-19 risk indicator parameter, which is the integrated measure of both COVID-19 data and credit risk metrics. The analysis uses a business intelligence tool, Tableau, to visualize geographically impact for a bank as per selected risk metrics and also displays industry-wise impact by integrated results of COVID-19 data, which extracts summarize version of most/least impacted counties and most/least impacted industries concerning bank exposure because of an epidemic. The study concluded that having this methodology and visualization of information available to risk management department or senior management of a bank, this will help them to make decisions like industry-wise relaxation on the credit products, before an asset becomes sub-standard take proactive measures such as debt restructuring, by looking at most impacted industries and banks credit exposure, appraise the provisioning factor and many more critical decisions.
Abstract: COVID-19 (coronavirus disease 2019) pandemic has affected the length and breadth of various industries and banking is one of the most distressed sectors. The main objective of the paper was to manifest the influence of COVID-19 on the credit exposure of a bank. Conventional risk management of a bank is having its business intelligence dashboard to ...
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