CAN SOCIAL INNOVATION STRENGTHEN RURAL BANK INDONESIA’S ORGANIZATIONAL CULTURE IN IMPROVING FINANCIAL SUSTAINABILITY?

Abstract

Rural banks in Indonesia are under increasing pressure to sustain their financial performance as competition intensifies from commercial banks, cooperatives, and rapidly expanding financial technology (fintech) firms. These competitive dynamics not
only affect profitability but also constrain rural banks’ ability to continue supporting micro, small, and medium enterprises (MSMEs), which play a crucial role in local economic development. Although prior research on banking sustainability has largely focused on financial indicators, limited attention has been given to the combined role of intangible internal resources and collaborative strategies in supporting longterm financial sustainability. Grounded in the Resource-Based View (RBV) and social innovation theory, this study seeks to examine the influence of organizational culture as an intangible resource on financial sustainability and to assess the moderating role of social innovation in strengthening this relationship. Using a quantitative research design, data were collected from 131 rural banks in Bali, Indonesia, and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings indicate that organizational culture has a significant positive effect on financial sustainability. Moreover, social innovation reinforces this relationship by enhancing the effectiveness of organizational culture in achieving sustainable financial outcomes. These results suggest that rural banks can improve their financial sustainability by integrating strong internal cultural foundations with externally oriented social innovation practices, particularly through collaboration and strategic partnerships. This study contributes to the extension of the Resource-Based View by demonstrating that social innovation serves as a complementary strategic resource that amplifies the value of organizational culture in fostering financial sustainability. The findings provide practical insights for policymakers and banking practitioners in formulating sustainability-oriented strategies for resource-constrained financial institutions.