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INTERNATIONAL JOURNAL OF SOCIAL SERVICE AND
RESEARCH
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EVALUATION OF MCKINSEY 7S FRAMEWORK MODEL APPROACH TO
CREDIT DISTRIBUTION WITH 5C AND 7P PRINCIPLES AT COMMERCIAL BANKING
Gina
Rahmasari*, Martha Fani Cahyandito, Agust Tato
Universitas Padjajaran, West Java, Indonesia
Email:
[email protected]*
Abstract
The strategic management process in lending is carried out
starting from environmental analysis when determining market targets and credit
risk assessments, then formulating strategies in lending by applying the
principle of prudence in each credit process which then implementing the
strategy can be seen from the NPL ratio, and the last process is an evaluation
of the implementation of the 5C and 7P principles on lending at the Commercial
Banking Directorate of PT Bank Mandiri (Persero) Tbk. The study aims to find out the implementation of the
5C and 7P principles. This study uses descriptive methods to identify problems,
explain symptoms, and examine conditions and prevailing practices based on the
information collected. Moreover, based on the explanation,
from each item of the questionnaire, it can be concluded that the application
of the 5C and 7P principles to credit distribution at Bank Mandiri
is quite good, but it is necessary to pay attention to several subvariables, especially personality on the 7P principle,
profitability on the 7P principle, and the Bank's profitability.
Keywords: parental support; learning motivation; self-regulated learning
Received 28
November 2022, Revised 11 December 2022, Accepted 22 December 2022
INTRODUCTION
Citing Law No. 10 of 1998 concerning banking,
it is stated that the Bank is a business entity tasked with collecting public
funds in the form of savings and channeling them back to the community in the
form of credit and/or other forms, in order to improve the standard of living
of the people at large. Sayekti dan Mauleny (2013), said that the
Bank functions as an intermediary institution between people who have more
funds and people who need funds.
According to the quote in Law no. 10 of 1998,
it is stated that credit has the meaning as a facility for providing
money/bills that can be equated with it based on an agreement or agreement
between other parties and the Bank, in which the borrower has an obligation to
repay the loan according to the agreed term and interest between the borrower.
and Banks.
Collection and Distribution of Credit is a
very important role of the Bank for the Indonesian economy, considering that
the flow of funds is used for various economic needs, both consumption,
business capital, and investment channeled through the Bank. For this matter,
the Bank as one of the drivers of the country's economy, is required to be able
to achieve its performance and maintain business continuity in a healthy,
transparent, and accountable manner (Buchory, 2014).
Putra dan Widjaja (2019)
stated that lending has the largest
contribution to bank income through interest income. This is in line with the
purpose of credit, namely obtaining profits which are generally obtained from
interest, helping customers' businesses by channeling credit for investment and
working capital, and helping the government through the profits earned (Kasmir, 2014).
Yanti (2020), states that credit risk is the potential failure of the borrower to
fulfill his obligations to the Bank according to the agreement that has been
determined between the customer and the Bank. Credit risk is still the most
significant risk for financial institutions as the devastating effects from the
current credit crisis will affirm (Psillaki et al., 2010). This is also in
accordance with what is written in the Circular Letter of Bank Indonesia No.
13/24/DPNP/2011, it is stated that Credit risk is the risk caused by the
failure of the borrower (customer/ debtor) to fulfill its obligations to the
Bank (Kola et al., 2019).
Non-Performing Loan
(NPL) is the ratio of non-performing loans classified into three categories,
namely substandard loans, doubtful loans, and bad loans (IBI, 2015). Based on Bank
Indonesia Regulation (2017), NPL is the ratio obtained from the distribution of
total loans of substandard, doubtful, and bad quality to the total loans
disbursed, according to Bank Indonesia Regulations, the maximum value set is
5%.
State-owned banks
are banks that contribute to the progress of the Indonesian economy, because
the majority of state-owned banks' capital is financed by state assets, so
state-owned banks are required to provide benefits to the state, including PT
Bank Mandiri (Persero) Tbk (Raharjo et al., 2018).
Figure 1. NPL Ratio
Credit
distribution will always be attached to the NPL ratio of each bank. Based on
the picture above, the average NPL of the four state-owned banks is around 2% -
5%. Based on Bank Indonesia Regulation (2017), each Bank must maintain a
maximum NPL value of 5%. Based on this, it can be concluded that the average
NPL value of the four state-owned banks is around 2.1% - 4.78%, including Bank Mandiri. For five consecutive years, Bank Mandiri has continued to maintain its credit quality, as
reflected in the NPL ratio as determine
Table
1
Bank
Mandiri Wholesale Unit NPL Ratio
|
Wholesale Unit
|
2017
|
2018
|
2019
|
2020
|
2021
|
|
Corporate Banking
|
0,38%
|
0,20%
|
0,04%
|
1,33%
|
1,31%
|
|
Commercial Banking
|
10,01%
|
10,54%
|
9,68%
|
11,27%
|
8,77%
|
|
Institutional Relations
|
0,00%
|
0,00%
|
0,00%
|
0,00%
|
0,00%
|
(Source: Annual Report 2017 - 2021)
Loans disbursed are the result of
a decision from a process carried out by applying the precautionary principle,
which is expected to minimize the risk of non-performing loans, as seen from
the NPL ratio. During the last 5 (five) years (2017 - 2021), Bank Mandiri's NPL ratio ranged from 2.39% - 3.45%. Commercial
Banking is a wholesale unit with an NPL ratio of 8.77% - 11.27%. This value has
exceeded the provisions stipulated by the 2017 Bank Indonesia Regulation, with
a maximum NPL value of 5%. Although this does not violate the established
regulations, according to research conducted by Puspitasari (2009), it is stated that
NPL has a negative effect on ROA, where the higher the NPL value, the lower the
profit.
Generally, every Bank is required
to apply the prudential principle, through the 5C principles and the 7P
principles (Rahmi, 2022). However, this
needs to be taken into account, how to apply the 5C and 7P principles applied
by the Commercial banking Directorate, considering the NPL value that exceeds
the maximum limit set (Sabrie et al., 2022). This assessment
is used through the McKinsey 7S Framework approach, to be one of the research
method guidelines.
McKinsey 7S Framework is one of the
evaluation tools, which consists of strategy, structure, style, system, staff,
skills, and shared values, which is expected through this method to reflect the
problems that occur in the Commercial Banking Directorate of Bank Mandiri, considering that the model is implemented (Hanafizadeh & Ravasan, 2011). Bank Mandiri in carrying out its business activities.
Indeed, it is necessary to
evaluate the implementation of prudential principles, namely the 5C and 7P
principles for lending at the Commercial Banking Directorate, considering that
the Commercial Banking Directorate's NPL is above the stipulated provisions.
The evaluation that will be carried out later in accordance with the last stage
in the strategic management process is evaluation and control.
Based on research conducted by
several researchers, the McKinsey 7s framework model can be used as an
evaluation tool for the implementation of prudential principles in lending at
the Commercial Banking Directorate. Considering, in carrying out its business
activities, Bank Mandiri is supported by several
factors which are also included in the McKinsey 7S Framework model, including
the Commercial Banking Directorate.
The process of granting credit in
Bank Mandiri's Commercial banking is in accordance
with the understanding of Strategic Management conveyed. Commercial Banking
credit disbursement is a business unit proposal through the Relationship
Manager as an Account officer who goes through a process of managerial
decisions and actions that will affect the performance of Bank Mandiri in the future.
The strategic management process
in lending is carried out starting from environmental analysis when determining
market targets and credit risk assessments, then formulating strategies in lending
by applying the principle of prudence in each credit process which then
implementing the strategy can be seen from the NPL ratio, and the last process
is an evaluation of the implementation of the 5C and 7P principles on lending
at the Commercial Banking Directorate of PT Bank Mandiri
(Persero) Tbk.
METHOD
This study uses descriptive methods to identify problems, explain
symptoms, and examine conditions and prevailing practices based on the
information collected. Sekaran dan Bougie (2017), state that the
operationalization of variables is carried out by dividing the variables used
into several stages, for example the nature, factors, and actions, which are
then shown through ideas which are then used as a reference to form
operationalization (Creswell & Poth, 2016).
This research uses two independent variables (X), namely the 5C
principle and the 7P principle and one related variable (Y), namely credit
distribution, which is detailed as follows:
1. Independent Variable (Independent Variable)
The
independent variables used in this research are as follows:
X1 : Principle 5C (Character, Capacity,
Capital, Collateral,
and Condition of
Economy)
X2 : 7P Principles (Personality,
Prospective, Purpose,
Payment,
Protection, Party,
and Profitability)
2. Related Variables (Dependent Variables)
The
related variables used in this study are as follows.
Y : Credit
Distribution (Bank Profitability,
Non Performing Loans, and Credit
Provision Procedures)
Table 2
Validity Test
|
Variable
|
Question Items
|
Validity Coef.
|
Table R Value
|
Information
|
|
5C Principle
|
X1.1
|
0.480
|
0.361
|
Valid
|
|
X1.2
|
0.367
|
0.361
|
Valid
|
|
X1.3
|
0.392
|
0.361
|
Valid
|
|
X1.4
|
0.669
|
0.361
|
Valid
|
|
X1.5
|
0.544
|
0.361
|
Valid
|
|
X1.6
|
0.512
|
0.361
|
Valid
|
|
X1.7
|
0.460
|
0.361
|
Valid
|
|
X1.8
|
0.479
|
0.361
|
Valid
|
|
X1.9
|
0.652
|
0.361
|
Valid
|
|
X1.10
|
0.644
|
0.361
|
Valid
|
|
X1.11
|
0.596
|
0.361
|
Valid
|
|
X1.12
|
0.733
|
0.361
|
Valid
|
|
X1.13
|
0.531
|
0.361
|
Valid
|
|
X1.14
|
0.608
|
0.361
|
Valid
|
|
X1.15
|
0.625
|
0.361
|
Valid
|
|
7P Principle
|
X2.1
|
0.737
|
0.361
|
Valid
|
|
X2.2
|
0.707
|
0.361
|
Valid
|
|
X2.3
|
0.660
|
0.361
|
Valid
|
|
X2.4
|
0.407
|
0.361
|
Valid
|
|
X2.5
|
0.531
|
0.361
|
Valid
|
|
X2.6
|
0.449
|
0.361
|
Valid
|
|
X2.7
|
0.527
|
0.361
|
Valid
|
|
X2.8
|
0.592
|
0.361
|
Valid
|
|
X2.9
|
0.432
|
0.361
|
Valid
|
|
X2.10
|
0.508
|
0.361
|
Valid
|
|
X2.11
|
0.432
|
0.361
|
Valid
|
|
X2.12
|
0.623
|
0.361
|
Valid
|
|
X2.13
|
0.763
|
0.361
|
Valid
|
|
X2.14
|
0.622
|
0.361
|
Valid
|
|
X2.15
|
0.626
|
0.361
|
Valid
|
|
X2.16
|
0.485
|
0.361
|
Valid
|
|
X2.17
|
0.547
|
0.361
|
Valid
|
|
Credit Distribution
|
Y1.1
|
0.539
|
0.361
|
Valid
|
|
Y1.2
|
0.662
|
0.361
|
Valid
|
|
Y1.3
|
0.635
|
0.361
|
Valid
|
|
Y1.4
|
0.652
|
0.361
|
Valid
|
|
Y1.5
|
0.713
|
0.361
|
Valid
|
|
Y1.6
|
0.613
|
0.361
|
Valid
|
|
Y1.7
|
0.703
|
0.361
|
Valid
|
By using a significance level of 5% as the testing
standard, from the table above it can be seen that each indicator of all
variables used has a correlation coefficient that produces a significance level
(calculation result) of less than 5% each.
Table 3
Reliability Test
|
Variable
|
Coef. Reliability
|
Critical Point
|
Information
|
|
5C Principles
|
0.8192
|
0.7
|
Reliabel
|
|
7P Principles
|
0.8584
|
0.7
|
Reliabel
|
|
Credit Distribution
|
0.7054
|
0.7
|
Reliabel
|
Based on the table above,
it can be seen that all variables have a Cronbach's Alpha value of more than
0.7, which means that all concepts of variable measurement in this study are
reliable. Thus, this research can be carried out at the next test stage.
RESULTS AND DISCUSSION
A.
5C
Principles
Table
4
Research
Results of 5C Principles
|
Dimensions/
Variables
|
Frequency
|
Category
|
Total
|
|
Very high
|
high
|
Currently
|
Low
|
Very low
|
|
Character
|
F
|
208
|
104
|
6
|
0
|
0
|
318
|
|
%
|
65,41%
|
32,70%
|
1,89%
|
0,00%
|
0,00%
|
100%
|
|
Capacity
|
F
|
281
|
37
|
0
|
0
|
0
|
318
|
|
%
|
88,36%
|
11,64%
|
0,00%
|
0,00%
|
0,00%
|
100%
|
|
Capital
|
F
|
132
|
120
|
66
|
0
|
0
|
318
|
|
%
|
41,51%
|
37,74%
|
20,75%
|
0,00%
|
0,00%
|
100%
|
|
Collateral
|
F
|
83
|
133
|
102
|
0
|
0
|
318
|
|
%
|
26,10%
|
41,82%
|
32,08%
|
0,00%
|
0,00%
|
100%
|
|
Condition of Economy
|
F
|
148
|
149
|
21
|
0
|
0
|
318
|
|
%
|
46,54%
|
46,86%
|
6,60%
|
0,00%
|
0,00%
|
100%
|
|
5C Principles
|
F
|
156
|
162
|
0
|
0
|
0
|
318
|
|
%
|
49,06%
|
50,94%
|
0,00%
|
0,00%
|
0,00%
|
100%
|
Based on the table
above, it is reflected that on the 5C principle of 318 respondents as many as
49.06% in the very high category and 50.94% in the high category. Furthermore,
from the five indicators, the capital dimension is reflected in 20.75% in the
medium category and in the collateral dimension 32.08% in the medium category.
The processing
results presented in the table above are an illustration of the 5C Principles
of Employees of the Commercial Banking Directorate of PT Bank Mandiri (Persero) Tbk. From the
table above, the mean total score is 1327 (84.54%). Then the total average is
entered into a continuum line as follows:
Figure 2. Variable Continuum
Line Principle 5C
From the picture above, it shows that the level of achievement of
respondents is in the very high category. Thus, it can be stated that the
employees of the Commercial Banking Directorate of PT Bank Mandiri
(Persero) Tbk have very high 5C Principles.
B.
7P Principles
Table 5
Research Results of 7P Principles
|
Dimensions/
Variables
|
Frequency
|
Category
|
Total
|
|
Very high
|
high
|
Currently
|
Low
|
Very low
|
|
Personality
|
F
|
16
|
54
|
189
|
59
|
0
|
318
|
|
%
|
5,03%
|
16,98%
|
59,43%
|
18,55%
|
0,00%
|
100%
|
|
Party
|
F
|
261
|
57
|
0
|
0
|
0
|
318
|
|
%
|
82,08%
|
17,92%
|
0,00%
|
0,00%
|
0,00%
|
100%
|
|
Purpose
|
F
|
183
|
135
|
0
|
0
|
0
|
318
|
|
%
|
57,55%
|
42,45%
|
0,00%
|
0,00%
|
0,00%
|
100%
|
|
Prospect
|
F
|
169
|
111
|
38
|
0
|
0
|
318
|
|
%
|
53,14%
|
34,91%
|
11,95%
|
0,00%
|
0,00%
|
100%
|
|
Payment
|
F
|
98
|
139
|
55
|
26
|
0
|
318
|
|
%
|
30,82%
|
43,71%
|
17,30%
|
8,18%
|
0,00%
|
100%
|
|
Profitability
|
F
|
15
|
21
|
143
|
139
|
0
|
318
|
|
%
|
4,72%
|
6,60%
|
44,97%
|
43,71%
|
0,00%
|
100%
|
|
Protection
|
F
|
0
|
0
|
102
|
216
|
0
|
318
|
|
%
|
0,00%
|
0,00%
|
32,08%
|
67,92%
|
0,00%
|
100%
|
|
7P Principle
|
F
|
13
|
245
|
60
|
0
|
0
|
318
|
|
%
|
4,09%
|
77,04%
|
18,87%
|
0,00%
|
0,00%
|
100%
|
Based
on the table above, it is reflected that the 7P principle out of 318
respondents was 4.09% in the very high category, 77.04% in the high category,
and 18.87% in the medium category.
Furthermore,
of the seven indicators, there are several dimensions that are categorized as
low, namely the personality dimension reflected 18.55, profitability 43.71% and
67.92% in protection.
The
processing results presented in the table above are an illustration of the 7P
Principles for Employees of the Commercial Banking Directorate of PT Bank Mandiri (Persero) Tbk. From the
table above, the mean total score is 1156 (72.71%). Then the total average is
entered into a continuum line as follows:
Figure 3 Principle Variable
Continuum Line 7P
C.
Credit
Distribution
Table 6
Frequency of Credit Distribution
|
Dimensions/
Variables
|
Frequency
|
Category
|
Total
|
|
Very high
|
High
|
Currently
|
Low
|
Very low
|
|
Bank Profitability
|
F
|
65
|
146
|
60
|
47
|
0
|
318
|
|
%
|
20,44%
|
45,91%
|
18,87%
|
14,78%
|
0,00%
|
100%
|
|
Non-Performing Loan
|
F
|
27
|
48
|
59
|
184
|
0
|
318
|
|
%
|
8,49%
|
15,09%
|
18,55%
|
57,86%
|
0,00%
|
100%
|
|
Credit Granting
Procedure
|
F
|
179
|
125
|
14
|
0
|
0
|
318
|
|
%
|
56,29%
|
39,31%
|
4,40%
|
0,00%
|
0,00%
|
100%
|
|
Credit Distribution
|
F
|
22
|
193
|
102
|
1
|
0
|
318
|
|
%
|
6,92%
|
60,69%
|
32,08%
|
0,31%
|
0,00%
|
100%
|
Based
on the table above, it is reflected that the lending of 318 respondents was
6.92% in the very high category, 60.69% in the high category, 32.08% in the
medium category and 0.31% in the low category.
Furthermore,
from the three indicators, there are several dimensions that are categorized as
low, namely the profitability dimension of the Bank which is reflected by
14.78% and non-performing loans 57.86%.
The
processing results presented in the table above is an illustration of Credit
Distribution of the Commercial Banking Directorate of PT Bank Mandiri (Persero) Tbk. From the
table above, the mean total score is 1142 (71.84%). Then the total average is
entered into a continuum line as follows:
Figure
4. Continuum Line of Credit Distribution Principle Variables
From the picture above, it shows that the
level of achievement of respondents is in the high category. Thus, it can be
stated that the Commercial Banking Directorate of PT Bank Mandiri
(Persero) Tbk has a high credit distribution.
Based on the descriptive results of the
5C principle variable, it can be seen that the implementation of the 5C
principle carried out by PT Bank Mandiri (Persero) Tbk in general can be said to be "high", this is
because the majority of the sub-variables in the 5C principle have
"high" information (50.94 %). Furthermore, for the descriptive
results of the 7P principle implementation variable, it can be seen that the 7P
principle implementation carried out by PT Bank Mandiri
(Persero) Tbk in general can be said to be in the
"high" category (77.04%).
Based on this, it can be stated that the
results of primary data processing, namely research questionnaires, can be
conveyed that each research variable, namely the 5C principle, the 7P
principle, and credit distribution has a "high" category.
Referring to the background of this
study, the statistical results of this study are inversely proportional to the
background of the study, in which the NPL of the Commercial Banking. Directorate
exceeded the maximum NPL limit set by Bank Indonesia. For this matter, a
research study was then carried out based on observations and interviews with
respondents. If you look thoroughly into each of the questionnaire items
submitted to the respondents, there are several questionnaire items that have
poor responses, which could be one of the causes of the formulation of the
problem in this study.
Based on the explanation, from each item
of the questionnaire, it can be concluded that the application of the 5C and 7P
principles to credit distribution at Bank Mandiri is
quite good, but it is necessary to pay attention to several subvariables,
especially personality on the 7P principle, profitability on the 7P principle,
and the Bank's profitability.
CONCLUSION
The results showed that the respondents'
responses regarding the application of the 5C principle scored very high, which
means that the account officer of the Commercial Banking directorate applied
the 5C principle very high.
The results showed that the respondents'
responses regarding the implementation of the 7P principles obtained a high
score, which can be stated that the account officer of the Commercial Banking
Directorate of PT Bank Mandiri (Persero) Tbk applied the 7P Principles high.
The results of the study indicate that
the respondents' responses to credit distribution obtained a high score. Based
on the results of simultaneous hypothesis testing, it can be stated that
Principle 5C and Principle 7P simultaneously affect credit distribution at the
Commercial Banking Directorate of PT Bank Mandiri
(Persero) Tbk.
The results of the study indicate that
with the McKinsey 7S framework model approach that has been described
descriptively, that the implementation of the 5C and 7P principles on lending
at the Commercial Banking Directorate of PT Bank Mandiri
(Persero) Tbk based on the McKinsey 7S concept has
been carried out properly and in accordance with the stages. and existing
regulations.
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