The effect of internal and external factors on bank investment credit’s demands

Abstract

This paper examines the impression of internal and external factors on the demand for credit investment than trading banks in West Sumatra, Indonesia. Data were sourced from the quarterly data of 2000.1 to 2017.4. This study uses the Autoregressive Distributed Lag (ARDL) model through the Bounds testing approach. The change that is used is the demand for investment credit (CI), credit interest rate (SBK), third party funds (DPK), non-performing loans (NPL), exports (EXP), inflation (INF) and economic growth (PDRB). The findings indicate, in the short- show that third-party funds, exports, inflation and non-performing loans will cause the credit investment demand constraint to occur. This paper indicates that in order to increase the stability of the demand for credit investments of commercial banks, the government should encourage more investment in the farming sector and real estate/housing, including for small and medium enterprises Micro-Enterprises so that inter-regional trade can systematically stimulate regional economies. Additionally, there should be the investment interest rate and credit checks on the state of the creditors through the supervision of financial services in order to avoid greater credit risk in the future. Bank Indonesia is expected to increase control over inflation mainly related to investment credit demand.