Determinants of bank officers’ intention to repayment risk minimization of small and medium sized enterprises in Malaysia

Abstract

The purpose of this study is to investigate the intention of Malaysian bank officers to minimise repayment risks when they offer products to Small and Medium-sized Enterprises (SME’s). In the past, there were many studies about the demand side of the credit supply (for example, difficulties in obtaining credit). However, studies on the supply side of credit were largely neglected. This study aims to determine the factors that are hypothesised to influence the intention of the bank officers to minimise repayment risks from SME’s. As the Theory of Planned Behaviour predominantly uses a quantitative research method, a research questionnaire was created as the research instrument and the non-probability sampling method (i.e. snowball sampling) was used to locate the respondents that fulfils the sampling criteria. The data collected was assessed using the measurement model and structural model and confirmed to be valid. The theory was extended by moderating the predictors of intention and the effects of past experience was also tested on intention. In addition, the model’s out-of-sample predictive ability is also assessed and predictive power is confirmed. The results of the study confirms the validity of all of the hypothesis except two. These results show there is a way to minimise SME repayment risks by using the banks’ human resources, and the application of Theory of Planned Behaviour can be extended to the banking field. It contributes to identifying factors that influences the intention of Malaysian bank officers to minimise repayment risks from SME’s. Also, it may contribute to the training provided by banks to its loan officers with a view to minimising non-performing loans (NPL’s) from SME’s in the future.