Credit Risk Management Strategy Based on the 5C Principles: Non-Performing Loan (NPL) Analysis in Determining the Collectibility Level of Multi-Purpose Loans at PT. BPD Jawa Timur Tbk. Cabang Pembantu Lawang-Malang Sub-Branch Office

Raissa Rabbani, Vidya Purnamasari

Abstract


This research aims to analyze credit risk management strategies based on the 5C principles in determining credit collectibility levels for Multipurpose Credit at PT. BPD Jawa Timur Tbk. Lawang-Malang Sub-Branch Office. The method used is a descriptive qualitative approach with data collection through in-depth interviews and observations to understand the strengths, weaknesses, opportunities, and threats (SWOT) faced by Bank Jatim in implementing credit risk management functions. The research results demonstrate that 5C principles (Character, Capacity, Capital, Collateral, Condition of Economy) effectively support credit evaluation and NPL reduction. Despite declining NPL trends, risks persist, with Capacity identified as the primary NPL driver due to heavy reliance on borrower salary stability. SWOT findings reveal implementation strengths in responsiveness and stable market focus while highlighting deficiencies in risk diversification and monitoring comprehensiveness. The study proposes Psychological Profiling Integration (PPI) as an innovative enhancement to character assessment capabilities, targeting a 25% reduction in false positive rates. This strategic innovation aims to enhance risk forecasting precision and bolster the bank’s market position within the civil servant lending sector.

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