The effect of income and funding diversification on bank performance and risk in Indonesia
List of Authors
  • Aldila Riza Pratiwi , Daddi Peryoga

Keyword
  • income diversification, funding diversification, bank performance, bank risk, bank size

Abstract
  • This research was conducted to determine the effect of income and funding diversification on bank performance and risks. The data used in this study is secondary data sourced from the financial reports of general and sharia banking for 2017–2021. The data sources are annual bank reports, published reports available at Bank Indonesia, the Indonesia Stock Exchange, and the Authority for Financial Services. The study results show that income diversification has no effect on bank performance and reduces bank risk. The results of bank income diversification in Indonesia have not been maximized because interest income remains the primary source of income. Meanwhile, funding diversification results in a decrease in bank performance and risk. Funding diversification can reduce bank risk. The expansion of funding diversification is intended to increase liquidity so that banks can meet their funding needs by increasing their liability portfolio. The diversity of costs that will be incurred by banks as returns from funding sources will reduce bank performance.

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