IMPACT AND MITIGATION OF CREDIT RISK ON CREDIT UNION

Abstract

The purpose of writing this paper is to determine the definition of credit risk, the factors that cause bad credit, the impact of bad credit and credit risk mitigation in cooperatives. Credit risk refers to the fact that the members cannot return the loan principal and interest in a timely manner, which causes the actual income results of the business unit to deviate from the expected profit goal, where the business unit experiences asset losses in the operation and management of credit cooperatives, where the factors that cause this credit risk described in the concept of negligent credit, namely causes originating from internal CU. Causes originating from borrowers (members) and causes originating from external factors of CU. The occurrence of bad loans certainly has an impact on the institutional development of cooperatives, especially the impact on the financial sector of cooperatives and the image of cooperatives, namely liquidity, net income (SHU) has decreased, institutional capital growth is low, ability to provide quality services to members has decreased, loan services are hampered The morale and morale of employees have decreased and the image of the cooperative in the community, especially members, is not good. To be able to prevent and avoid the work and bad effects of bad credit, it is necessary to mitigate credit risk. Risk mitigation is related to credit risk management. Credit risk mitigation has become a mandatory thing to be prepared if the company is in the credit financing business or disbursing loan funds. Credit risk mitigation can be done through several stages, namely screening of credit applicants, credit risk analysis and the Credit Risk Scoring Method.

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