Credit Restructuring Strategies for Non-Performing Loan Reduction: Evidence from Bank Papua Timika Branch

Purpose: This study examines the trends and drivers of non-performing loans (NPL) and evaluates the effectiveness of credit restructuring strategies at Bank Papua Timika Branch, a regional development bank in Mimika Regency, Papua Tengah Province, Indonesia.

Research Methodology: A descriptive qualitative design was used with in-depth interviews of six purposively selected informants (PB1–PB6) and internal financial data from 2017–2023. Data analysis followed the Miles and Huberman model, with organizational factors synthesized via SWOT and McKinsey 7S, and debtor risks evaluated using the 5C framework (Character, Capacity, Capital, Collateral, Condition).

Results: NPL ranged from 0.82–0.84% in 2017–2019, rose to 1.75% in 2020 due to COVID-19, and dropped to 0.77% by 2023 after restructuring. The IDR 34.344 billion portfolio, concentrated in construction, MSME, and mining, was mainly driven by capacity and economic factors. Restructuring recovered 60–75% of debtors, while 25–30% remained non-performing.

Conclusions: Effective NPL reduction requires integrated strategies combining sector-specific restructuring, proactive 5C-based debtor assessment, McKinsey 7S organizational alignment, and sensitivity-informed risk projection rather than generic portfolio-level measures.

Limitations: The study covers a single branch and uses qualitative methods, limiting causal inference and formal NPL forecasting.

Contributions: The study introduces a multi-framework evaluation model (5C × McKinsey 7S × sectoral portfolio × sensitivity analysis) for NPL management in regional resource-based banks, contributing to credit risk and community banking literature in Eastern Indonesia.