Impact of internal and external factors on the net interest margin of banks in Indonesia

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This study aims to assess the impact of bank-specific factors and macroeconomic indicators on the net interest margin (NIM) of commercial banks in Indonesia. Data from Indonesian commercial banks are used. Data are collected from the banks’ annual reports and the Financial Services Authority (OJK) for the period 2008 to 2018. A panel data regression model is used to estimate the effect of bank-specific and macroeconomic factors. The results prove that the variables of Non-Performing Loans (NPL), Loan to Deposit Ratio (LDR), Return on Assets (ROA), Interest Rate (SBI), and Exchange Rate (FOREX) affect NIM. The exchange rate variable has a predominant effect, while the NPL factor has a less strong influence on NIM. The empirical evidence from this research is important for commercial banks in Indonesia to improve operational efficiency through NIM performance. Internal and external factors of a bank should be subject of attention of bank managers.

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    • Table 1. Determination of NIM
    • Conceptualization
      Endri Endri
    • Formal Analysis
      Endri Endri, Asti Marlina
    • Investigation
      Endri Endri
    • Methodology
      Endri Endri
    • Validation
      Endri Endri
    • Writing – review & editing
      Endri Endri
    • Project administration
      Asti Marlina
    • Visualization
      Asti Marlina
    • Writing – original draft
      Asti Marlina
    • Data curation
      Hurriyaturrohman
    • Resources
      Hurriyaturrohman
    • Software
      Hurriyaturrohman
    • Supervision
      Hurriyaturrohman