Public Ownership and Local Bank Lending at the Onset of the COVID-19 Pandemic: Evidence from Indonesia

This paper empirically analyzes whether the Covid-19 pandemic has brought about a significant impact on the lending of local banks and whether such impact has been different for public as compared to private local banks. Using panel data from 1,344 Bank Perkreditan Rakyat (BPRs) in Indonesia between the first quarter of 2018 and the third quarter of 2021, this paper confirms the negative impact that Covid-19 pandemic has had on local bank lending. This paper also confirms that the impact of the Covid-19 pandemic on lending has been smaller for local banks owned by majority provincial and/or local government shareholders than for local banks owned by private shareholders. These findings are robust and not subject to the choices of proxy for the Covid-19 pandemic, regression estimators, and control variables.