SUSTAINABILITY BANKING PRACTICES AND INFLATION ON CREDIT RISK

Abstract

Purpose: This study aims to examine the effect of capital, liquidity, green lending, and inflation on credit risk.

Methodology/approach: This quantitative study uses 46 commercial banks listed on the Indonesia Stock Exchange (IDX) as samples from 2018 to 2023. The method uses a saturated sample, while data analysis uses a random effect model assisted by the Stata program.

Results/findings: The results showed that capital, and liquidity variables had no effect on credit risk, but green lending and inflation variables had an effect on credit risk.

Limitations: This study is limited to the period of bank data which may be influenced by the economic conditions and policies in place during the study. In addition, there are few previous studies internationally that contain detailed explanations of similar topics.

Contribution: The results of this study can be used as a reference source for future researchers, and make an important contribution in understanding the factors that influence credit risk, especially in the banking sector.

Novelty: This study offers novelty by exploring the influence of capital, liquidity, green lending, and inflation rate on credit risk in the banking industry in developing countries such as Indonesia.