The role of cultural capital in improving the financial performance of village credit institutions

Abstract

The Village Credit Institution (LPD) is an organization of micro finance which is in the scope of Balinese traditional villages. More specifically, LPDs whose members are indigenous people are very strong with a culture that grows and develops in society, so that activities in achieving organizational goals can be achieved through collaboration of cultural capital. The desired achievement describes organizational structure, cultural capital, and credit risk in improving financial performance which places cultural capital as a moderating variable in LPD in Bali. Quantitative methods are used in this study, namely selecting specific cases on the structure of the role of cultural capital for the organization. Quantitative data processing using SEM-PLS, the number of samples includes 100 respondents obtained through a questionnaire. The results of this study indicate that cultural capital plays an important role in LPD activities, especially related to organizational structure, credit risk, efficiency, and financial performance. Even though in a pandemic condition, the LPD spends to provide massive assistance, this proves that the LPD is a hybrid organization which also emphasizes a social perspective with an emphasis on wisdom. Novelty raised in this research is the emergence of collaboration patterns between LPDs and customers in the framework of common interests. This research has implications for LPD as a reference for positive perspectives on the role of cultural capital on organizational dynamics. Furthermore, this research can provide input to local governments that local regulations are needed that can assess social activities carried out by LPDs.