Bank lending during the COVID-19 pandemic: do alliances and digital strategies matter?

Abstract

Purpose

This paper investigates the joint impact of COVID-19, alliances and digital strategies on bank lending. Additionally, this study examines whether the effect of COVID-19, alliances and digital strategies on bank loans depends on the types of banks.

Design/methodology/approach

Using a sample of 92 commercial banks in Indonesia from March 2020 to September 2021, a fixed-effects model (FEM) was used to analyze data.

Findings

This study provides robust results regarding the negative impact of the COVID-19 pandemic on bank loans in Indonesian banking. Furthermore, it reveals that collaboration between banks and FinTech does not substantially influence bank lending, despite the rise in proven cases tending to reduce credit expansion. It emphasizes the importance of the development of mobile banking as part of digitalization in boosting loan bank expansion, and this finding is more noticeable in private and small banks.

Practical implications

This study highlights some policy recommendations to improve bank lending during the COVID-19 period, particularly the role of new alliances and digital strategy in involving COVID-19 pandemic mitigation within a novel financial ecosystem.

Originality/value

This study offers a significant contribution to the empirical literature that specifically explores the joint impact of the COVID-19 pandemic, alliances and digital strategies on bank lending in banking.

Citation

Yudaruddin, R. (2023), "Bank lending during the COVID-19 pandemic: do alliances and digital strategies matter?", Managerial Finance, Vol. 49 No. 7, pp. 1221-1238. https://doi.org/10.1108/MF-04-2022-0167