THE DOMINANT FACTOR OF 5C TOWARD BAD DEBT OF SMEs SECTOR IN NORTH JAKARTA

Abstract

The biggest profit of Banks came by giving loans. Banks usually used 5C (Characteristic, Capacity, Capital, Collateral, Condition) as a common credit risk assessment system. It has been characterized by Gestel and Baesens (2009) that according to the borrowers' character (for example, their reputation, responsibility and credit record history those are the principle criteria to focus the borrower characters ), capacity (it refers the limit of borrowers repay the loan, including the working conditions of the borrower’s enterprises), capital, collateral, condition (it implies the enterprises' business environment and patterns in the entire economy).Small and Medium Enterprises (SMEs) have large contribution in Indonesia’s economy, employment and GDP. SMEs in Indonesia usually have same problem in financing. So they need loans to help their financing. But many SMEs that can’t pay the loan on time. It can call as a bad debt. Bad debt could occur caused with the bank that has management in analysis of credit that is not accurate, the supervision of a weak credit, analysis of the financial report is inadequate and competence of human resources that are still weak. The purpose of this research is to analyze the analysis of factors that consist of several variables, which are, Characteristic, Capacity, Capital, Collateral, and Condition have correlation towards bad debt in SMEs sector. This research was using quantitative method research. To collect the information, researcher spread the questionnaire to 71 owners of SMEs that got loans from Banks in North Jakarta. The data analyze using factor analysis. The results of this research shown that all the five variables have significant correlation and 3 variables formed as the dominant factor toward bad debt in SMEs sector.