Associations Between Internal Control Audit, Credit SOP Compliance, Credit Supervision,Associations Between Internal Control Audit, Credit SOP Compliance, Credit Supervision, and Perceived Problematic Credit: The Moderating Role of Credit Risk Management

Abstract

Problematic credit remains a significant concern for savings and loan cooperatives because it may affect financial stability and the sustainability of lending activities. This study aims to examine the relationships of Internal Control Audit, Credit Standard Operating Procedure (SOP) Compliance, and Credit Supervision with Problematic Credit, as well as to investigate the moderating role of Credit Risk Management in these relationships. This study employed a quantitative approach with a cross-sectional design. Data were collected through questionnaires from 135 respondents representing 27 Savings and Loan Cooperatives in East Jakarta, with each cooperative represented by a Chairperson, Administrator, Supervisor, Credit Officer, and Cooperative Member. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4. The results show that Internal Control Audit and Credit Supervision are not significantly associated with Problematic Credit. Credit SOP Compliance is significantly and positively associated with Problematic Credit, which is contrary to the hypothesized negative relationship. Furthermore, Credit Risk Management does not significantly moderate the relationships of Internal Control Audit, Credit SOP Compliance, or Credit Supervision with Problematic Credit. These findings indicate that higher perceived compliance with credit procedures does not necessarily correspond to lower Problematic Credit and that Credit Risk Management has not demonstrated a significant moderating role in the relationships examined. This study contributes to the literature on credit management in savings and loan cooperatives and highlights the importance of strengthening the substantive implementation of credit procedures, credit supervision, and risk management practices to support more effective credit management.