The Effect of Loan to Deposit Ratio (LDR) on Return on Assets (ROA) in Rural Banks in Indonesia

Abstract

This study aims to analyze the effect of the Loan to Deposit Ratio on the Return on Assets of Rural Banks (Bank Perkreditan Rakyat/BPR) in Indonesia during the period from August 2020 to August 2021. The research employed a quantitative approach using simple linear regression analysis with the SPSS program. The results indicate that Loan to Deposit Ratio has no significant effect on Return on Assets, with a significance value of 0.102 (> 0.05). This finding implies that an increase in credit disbursement ratio does not directly enhance the profitability of rural banks. The coefficient of determination (R²) of 0.225 indicates that only 22.5% of the variation in Return on Assets is explained by Loan to Deposit Ratio, while the remaining 77.5% is attributable to other factors, such as operational efficiency and credit risk. The study concludes that effective liquidity and risk management play a more crucial role than merely increasing the Loan to Deposit Ratio ratio in maintaining the financial stability and profitability of rural banks