BRANCH PROFITABILITY IN MICROFINANCE INSTITUTION

• Main Author: Putranto, Adityo
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/76465
• Institution: Institut Teknologi Bandung

PT Ibu Berdaya Fintek (Ibu Berdaya) is a fintech peer to peer lending service which connects urban lenders with micro entrepreneurs in rural areas that has obtained a business license from OJK. As of December 31, 2020, Ibu Berdaya has disbursed Rp 3,18 trillion (US$ 227 million) funds from mostly urban lenders to 569,417 women micro entrepreneurs across 18.900 villages in Java, Sulawesi, and Sumatra. Based on Ibu Berdaya internal report, 83.12% of company’s revenue coming from the branch operation. The ability of branches to generate income and maintain profitability significantly affects the company's ability to turn a profit. This study aims to identify variables that influence the profitability of branches in microfinance institutions and develop suggestions to raise branch profit margins. We used branch profit margin as dependent variable and total 21 independent variables consists of 19 internal variables from Ibu Berdaya branches report & 2 external variables (UMR and PDRB). Machine learning's multiple linear regression model is utilized to develop variables that have significant positive connections with branch profitability (profit margin). Varian Inflation Factor (VIF) calculation done on the first to eliminate the multicollinearity between independent variables. For the purpose of estimating each variable's regression coefficient, we employed the Ordinary Least Square (OLS) approach.The result model has R-squared coefficient 92.12 indicated high level of accuracy. The research shows that average monthly disbursement (sequence loan & new loan), branch age, and numbers of account officers has significant and positive effect on branch profitability. While total outstanding of past due loan, average outstanding of new loan, and UMR in branch area can cause some decrease on branches profit margin. In order to sustain branches' profitability at the appropriate level, this study advises keeping the optimal ratio of sequence loan disbursement to new loan disbursement, adopting the loan approval matrix policy, and allowing the most borrowers per account officer. It is advised to conduct additional research to understand how the UMR on branch operation area correlates with branch performance.