Transformation Without Profitability? An Econometric Study of Cost Efficiency, Credit Risk, and Regional Economic Constraints in Bank Papua, 2015–2025

Abstract

This study examines why Bank Papua’s institutional and digital transformation did not result in sustained profitability improvement during 2015–2025. As a Regional Development Bank (RDB), Bank Papua must balance commercial profitability with regional development in Tanah Papua, despite high-cost geography, limited infrastructure, uneven financial inclusion, underdeveloped private-sector depth, and elevated credit risk. Using a quantitative explanatory design, this study applies an Ordinary Least Squares (OLS) model to assess the effects of BOPO, Non-Performing Loans (NPL), Loan-to-Deposit Ratio (LDR), Capital Adequacy Ratio (CAR), asset size, regional economic growth, inflation, and a digital transformation dummy on profitability, measured by Return on Assets (ROA) and Return on Equity (ROE). The study argues that profitability stagnation reflects not only managerial issues, but also structural banking and regional development constraints. High operating costs, weak loan quality, and regional economic limitations may offset gains from asset growth and digital modernization. The findings are expected to contribute to the literature on Indonesian regional development banks, bank profitability, and financial transformation in peripheral economies.