Factors Influencing Islamic Bank Financing in Indonesia

Abstract

As intermediary institutions, Islamic banks gather funds from society and then transmit in the form of financing. In practice, the distribution of financing that is the main feature that runs Islamic banks is not as easy in practice as it is in theory since it involves a large number of troubled financing constraints. The reason for this is the lack of procedures to assess banks and supervise customers. This research thus aims to analyze the effect of third-party funds (DPK), Return On Assets (ROA), Non-Performing Financing (NPF) and Financing the Deposit Ratio (FDR) on the total financing provided to society by the Islamic banks in Indonesia. The data used was monthly data issued by Otoritas Jasa Keuangan (OJK) in Sharia Banking Statistics during the period of January 2009-2017. This research uses the Johansen cointegration test to investigate long-term relationships and use the model of error correction (Error Correction Model) to see the short-term relationship. The results show that third-party funds and ROA influence financing in the short term and long term. Other variable is the FDR, which had the influence of short-term financing. Non Performing Financing does not affect the financing either in a short-term or long-term period.

Factors Affecting Financing on Islamic Rural Bank in Yogyakarta and Central Java Province

“…This shows that the larger the TPF that is successfully collected by the bank, the bank tends to require large financing as well. The results of this study are in accordance with Adzimatinur et al (2015) and Medyawati & Yunanto (2019) whose research shows that TPF has a positive and significant influence on financing. The amount of financing distributed by banks can be handled by TPF because TPF is the largest and most reliable source of bank management (Rimadhani & Erza, 2011).…”

“…The larger the TPF, the greater the financing issued by the bank. According to research conducted by the research title " (Medyawati & Yunanto, 2019) Factors Influencing Islamic Bank Financing in Indonesia. The Journal of Economics and Business" shows that Third Party Funds have an influence on financing both long-term and short-term.…”

The Determinants of Musharaka Financing in Indonesia

“…The increase in bank liquidity is obtained through bank profits after financing using a profit sharing system. This statement is in line and evidenced by research conducted by Destiana (2016), Nurrochman (2016), Hasi and Sonjaya (2016), Medyawati and Yunanto (2019) stating that TPF has a significant effect on musharaka financing.…”

Financing Scheme and Determinant Factors

“…Bank profits also affect financing; the higher the bank's profits, the more funds can be channeled as financing. The results of previous studies show that ROA has a positive effect on financing [10,11].…”

“…The higher the TPF indicates the public trusts the bank in saving their funds. TPF is the primary fund channeled for financing; the larger the TPF, the greater the bank's ability to provide financing [10,12,13].…”