Financing Scheme and Determinant Factors

Abstract

This study aims to examine the factors that influence the financing scheme of Islamic Rural Banks (IRBs) in Indonesia. The financing scheme consists of profit margin financing (PMF) and profit-sharing financing (PSF). Factors thought to influence the financing scheme are non-performing financing (NPF), financing to deposit ratio (FDR), capital adequacy ratio (CAR), return on assets (ROA), operating to income ratio (OEIR), and company size (Size). The population in this study was 163 IRBs in Indonesia with a sample of 100 IRBs. The observation period was 4 years, with quarterly data. Hypothesis testing applied multiple regression. The results show that the factors influencing the financing scheme between PMF and PSF are the same, namely, NPF and Size have a significant negative effect, while FDR, CAR, ROA and OEIR have no effect. One variable is OEIR; if the significance level is 10%, then OEIR has a significant and negative effect on the profit-sharing financing scheme, but the profit-margin financing scheme has no effect.