Banks need to consider other aspects besides financial ratios

Oct 13, 2025 by miodeya.com 9 views

The Effect of Debtor Financial Ratios in Providing Credit to PT Bank Rakyat Indonesia (Persero) Tbk Binjai Branch

Introduction

Providing credit to debtors is a crucial process in the banking world, and it requires a thorough analysis of the debtor's financial condition. PT Bank Rakyat Indonesia (Persero) Tbk Binjai Branch, like other banks, relies on financial ratios to assess the creditworthiness of its debtors. However, the question remains: do financial ratios have a significant impact on credit granting? This study aims to examine the effect of debtor financial ratios on credit granting at PT Bank Rakyat Indonesia Binjai Branch.

Background

Credit granting is a complex process that involves various factors, including the debtor's financial condition, credit history, and market conditions. Financial ratios are a vital tool in assessing the debtor's financial condition and its ability to meet payment obligations. The liquidity ratio, activity ratio, solvency ratio, and profitability ratio are the four main financial ratios that are commonly used in credit analysis. These ratios provide an overview of the debtor's financial health and its ability to manage its finances.

Methodology

This study used a quantitative approach to analyze the effect of debtor financial ratios on credit granting. The data used in this study were secondary data taken from the debtor's financial statements in 2008. The sample size was 30 debtors who received short-term working capital loans in 2009. The data were analyzed using multiple linear regression, which involved testing the classic assumptions, T test, F test, and determination coefficient test.

Results

The results of the analysis showed that simultaneously, financial ratios did not affect credit granting. However, partial analysis revealed that the current ratio, quick ratio, total asset turnover, and debt to total assets ratio had no significant effect on credit granting. Interestingly, the net profit margin was proven to have a significant influence on credit granting.

Discussion

The findings of this study suggest that financial ratios do not have a significant impact on credit granting at PT Bank Rakyat Indonesia Binjai Branch. However, the net profit margin, which reflects the operational efficiency and profitability of a company, significantly affects the provision of credit. This shows that banks may be more focused on the ability of debtors to generate profits rather than paying attention to liquidity or activity.

The results of this study have several implications for banks and debtors. Firstly, banks need to consider other aspects besides the liquidity ratio in the credit analysis process. A more holistic assessment of debtor financial performance can assist banks in reducing credit risk and making better decisions in the process of granting loans. Secondly, debtors need to understand what the bank's attention is in the loan process. This is expected to create a better relationship between financial institutions and debtors and increase access to more secure and sustainable loans.

Conclusion

In conclusion, this study provides valuable insights into the effect of debtor financial ratios on credit granting at PT Bank Rakyat Indonesia Binjai Branch. The findings suggest that financial ratios do not have a significant impact on credit granting, but the net profit margin has a significant influence on credit granting. This study highlights the importance of considering other aspects besides financial ratios in the credit analysis process. It also underlines the importance of deep understanding of market conditions and debtors that can affect their financial health.

Recommendations

Based on the findings of this study, the following recommendations are made:

Banks need to consider other aspects besides financial ratios: Banks need to consider other aspects besides financial ratios in the credit analysis process. A more holistic assessment of debtor financial performance can assist banks in reducing credit risk and making better decisions in the process of granting loans.
Debtors need to understand what the bank's attention is: Debtors need to understand what the bank's attention is in the loan process. This is expected to create a better relationship between financial institutions and debtors and increase access to more secure and sustainable loans.
Banks need to consider market conditions: Banks need to consider market conditions and debtors that can affect their financial health. This is expected to reduce credit risk and make better decisions in the process of granting loans.

Limitations

This study has several limitations. Firstly, the sample size was limited to 30 debtors. Secondly, the data used in this study were secondary data taken from the debtor's financial statements in 2008. Finally, the study only focused on PT Bank Rakyat Indonesia Binjai Branch and may not be generalizable to other banks.

Future Research Directions

This study provides several avenues for future research. Firstly, future studies can examine the effect of other factors on credit granting, such as credit history and market conditions. Secondly, future studies can investigate the impact of financial ratios on credit granting in other industries. Finally, future studies can explore the relationship between financial ratios and credit granting in other countries.

Conclusion

Q: What is the purpose of this study? A: The purpose of this study is to examine the effect of debtor financial ratios on credit granting at PT Bank Rakyat Indonesia Binjai Branch.

Q: What are the financial ratios analyzed in this study? A: The financial ratios analyzed in this study include liquidity ratios, activity ratios, solvency ratios, and profitability ratios.

Q: What are the liquidity ratios analyzed in this study? A: The liquidity ratios analyzed in this study include the current ratio and quick ratio.

Q: What is the current ratio? A: The current ratio is a liquidity ratio that measures a company's ability to pay its short-term debts using its current assets.

Q: What is the quick ratio? A: The quick ratio is a liquidity ratio that measures a company's ability to pay its short-term debts using its liquid assets.

Q: What are the activity ratios analyzed in this study? A: The activity ratios analyzed in this study include the total asset turnover.

Q: What is the total asset turnover? A: The total asset turnover is an activity ratio that measures a company's ability to generate sales from its total assets.

Q: What are the solvency ratios analyzed in this study? A: The solvency ratios analyzed in this study include the debt to total assets ratio.

Q: What is the debt to total assets ratio? A: The debt to total assets ratio is a solvency ratio that measures a company's ability to pay its debts using its total assets.

Q: What are the profitability ratios analyzed in this study? A: The profitability ratios analyzed in this study include the net profit margin.

Q: What is the net profit margin? A: The net profit margin is a profitability ratio that measures a company's ability to generate profits from its sales.

Q: What are the results of this study? A: The results of this study show that simultaneously, financial ratios do not affect credit granting. However, partial analysis reveals that the current ratio, quick ratio, total asset turnover, and debt to total assets ratio have no significant effect on credit granting. Interestingly, the net profit margin is proven to have a significant influence on credit granting.

Q: What are the implications of this study? A: The implications of this study are that banks need to consider other aspects besides financial ratios in the credit analysis process. A more holistic assessment of debtor financial performance can assist banks in reducing credit risk and making better decisions in the process of granting loans.

Q: What are the limitations of this study? A: The limitations of this study are that the sample size was limited to 30 debtors, the data used in this study were secondary data taken from the debtor's financial statements in 2008, and the study only focused on PT Bank Rakyat Indonesia Binjai Branch.

Q: What are the future research directions of this study? A: The future research directions of this study are to examine the effect of other factors on credit granting, such as credit history and market conditions, to investigate the impact of financial ratios on credit granting in other industries, and to explore the relationship between financial ratios and credit granting in other countries.

Q: What are the practical implications of this study? A: The practical implications of this study are that banks need to consider other aspects besides financial ratios in the credit analysis process, debtors need to understand what the bank's attention is in the loan process, and banks need to consider market conditions and debtors that can affect their financial health.

Q: What are the theoretical implications of this study? A: The theoretical implications of this study are that financial ratios do not have a significant impact on credit granting, but the net profit margin has a significant influence on credit granting. This study highlights the importance of considering other aspects besides financial ratios in the credit analysis process and underlines the importance of deep understanding of market conditions and debtors that can affect their financial health.