Definition of problematic financing – This time we will discuss the meaning of problematic financing and its types and causes. Here’s the explanation …
Table of contents :
- Definition of Problem Financing
- Causes of Problematic Financing
- Due to Bank Error
- Due to Customer’s Error
- External Factors
- Types of Problematic Financing
- Financing Has Prospects
- Financing Has No Prospects
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Definition of Problem Financing
Problematic financing or what we often know about Non-Performing Loans (NPLs) is a picture of a situation, where the loan repayment agreement is at risk of failure, even tends to cause / experience potential losses (potential losses).
The existence of problematic financing in high amount will cause difficulties and at the same time will reduce the soundness level of the bank concerned.
The increase in problem financing has resulted in banks having to provide large debt relief reserves,
i.e. 1% for current financing, 25% for special mention financing, 50% for substandard financing,
75% for doubtful financing and 100% for doubtful financing. to default, so that Financing capacity is very limited.
Financing that is included in the category of non-performing financing is sub-standard financing (doubtful), bad financing (loss) and financing. B
ank Indonesia (BI) through the Bank Indonesia Regulation (PBI) stipulates that the credit risk ratio is 5%, which is obtained by comparing the total non-performing financing (NPL) with the total disbursed financing.
Non Performing Financing Formulas:
Causes of Problematic Financing
1. Due to Bank Error
Errors caused by banks usually include:
- Less background checks on the prospect
- Lack of sharpness in analyzing the purposes and objectives of the use of financing and sources of repayment;
- Lack of understanding of actual financial needs, potential customers and what benefits are provided;
- Not good at analyzing financial reports of potential customers;
- Incomplete list of conditions;
- Too aggressive;
- Gives too much pocket money;
- Lack of experience from financial officers or account officers;
- Financial officers or account officers are easily influenced, intimidated, or coerced by potential customers
- Excessive confidence;
- Lack of conducting reviews, requesting reports, and analyzing financial reports and other financial information;
- Do not make direct visits to the customer’s company location;
- Lack of contact with customers;
- Providing too much financing without realizing it;
- Excessive annoyance from owners;
- The collateral bond is imperfect;
- There are personal interests of bank officials;
- Compromise with financing principles;
- There is no policy;
- Easy attitude from account clerk.
Also Read: Understanding Posts
2. Due to Customer’s Error
Customer-caused errors include:
- Incompetent customer;
- The customer has no or lack of experience;
- The customer leaves little time for his business;
- Dishonest customers;
- Greedy customer;
3. External Factors
As a result of external changes in enfirment identified causes of problem financing, such as changes in the political and legal environment, the real sector, financial deregulation and the economy have a detrimental effect on the debtor.
These changes are an ongoing challenge faced by company owners and managers.
One of the keys to managing business success is the ability to anticipate change and be flexible enough to manage the business.
External problems will arise from the external environment, as a result of the failure of managers to properly anticipate and adapt to these changes such as economic conditions, changes in regulatory changes or natural disasters.
Types of Problematic Financing
1. Financing Has Prospects
Namely the financing provided to customers experiencing difficulties, after which the problem was identified and evaluated, it was concluded that Mudarib still had hopes of increasing the collectability of his financing.
Financing that is included in this category is sub-standard financing.
2. Financing Has No Prospects
Namely the financing provided to customers who are experiencing difficulties, after which the problem is identified and evaluated, it is concluded that the mudarib has no hope of increasing the collectability of its financing.
And the sources of payment for financing received are only expected from others. business or selling bail.
Financing that falls into this category is dubious financing and poor financing.