IMPROVING PERFORMANCE THROUGH A HARMONIOUS CULTURAL APPROACH IN CREDIT RISK

Abstract

Loan risk is important in developing the performance of a microfinance institution. The aim of the
research was to analyze financial performance through a harmonious cultural approach in reducing
credit risk. The research employed two data analysis approaches, qualitative and quantitative. The
result of the qualitative study would be utilized to develop a questionnaire. Ninety-four (94)
companies were selected as the samples by using Slovin Method. The result of the qualitative study
explained that credit risk in harmonious cultural-based handling was influenced by the loan
quality, the collateral quality, customary rules, traditional leaders, and the belief in karma phala
law. Quantitatively, it was found that loan quality, collateral quality, customary rules, traditional
leaders, and the belief in karma phala law simultaneously influenced the financial performance of
the BPR (village financial institution). The research result provided a new insight in handling credit
risk and improving financial performance. Managers had an opportunity to utilize local culture to
develop strategy and improve performance.