The Role of Government Stimulus in Moderating Bank Resilience During the Crisis: A Study of MSME Loan and Credit Risk Management in Commercial Banks in Indonesia During the Covid-19 Pandemic

Research Aims: This study aims to examine how the COVID-19 pandemic affects bank resilience and analyzes the role of government stimulus in moderating the impact of the COVID-19 pandemic on bank resilience, particularly related to loan growth and non-performing loans (NPLs) of MSME. Design/methodology/approach: This study employs a quantitative explanatory approach utilizing the Generalized Least Squares (GLS) method on panel data from 73 conventional commercial banks in Indonesia, observed quarterly over the 2020–2023 period. The moderation analysis is conducted through a mean difference test for MSME loan growth, complemented by a descriptive mean comparison analysis for MSME NPLs. Research Findings: Empirical findings reveal that COVID-19 significantly reduced MSME loan growth and increased non-performing loans (NPLs). Nonetheless, government stimulus through loan restructuring effectively mitigated these adverse effects, while the fund placement program in banks exhibited limited and delayed influence on MSME credit expansion during the pandemic, highlighting differing policy effectiveness levels. Theoretical Contribution/Originality: This study contributes to enrich financial intermediation theory by providing empirical evidence on the impact of the COVID-19 pandemic on banking resilience in Indonesia and the moderating role of government stimulus. The findings offer theoretical insights and policy implications for strengthening financial stability during and after crises. Keywords: Fiscal Stimulus, Bank Resilience, MSME NPL, COVID-19, Intermediation Function.