Measuring the Role of Non-Performing Financing in Boosting Profitability of Islamic Commercial Banks

Pujiyanty, Lusy; Puspita, Rosana Eri; Mochlasin, Mochlasin

doi:10.18860/ed.v10i1.12955

Cited by 3 publications

(4 citation statements)

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“…That is, NPF strengthens the effect of murabahah financing on the profitability of Islamic Commercial Banks. In contrast, Pujiyanty et al. (2022) state that non-PLS financing moderated by NPF negatively and significantly affects ROA in Islamic Commercial Bank in Indonesia.…”

Section: Hypothesismentioning

confidence: 80%

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Are Sharia Financing Schemes Profitable? The Case of Islamic Rural Banks in Indonesia

Hidayah

Karimah²

2023

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Some studies find that Profit and Loss Sharing/PLS (mudharabah and musyarakah) and non-PLS (murabahah) financing positively affect Islamic banks' profitability, while other studies have found a negative relationship. This study aims to analyze the effect of PLS and non-PLS financing on the performance of Islamic banks, as proxied by the profitability ratio of ROA (Return on Assets) with the Non-Performing Finance (NPF) as a moderating variable on six Islamic Rural Banks (IRBs) using panel regression and moderated regression analysis. It finds that the PLS and non-PLS financing positively and significantly influence the IRBs' profitability. NPF as a moderating variable has weakened the effect of PLS financing on the IRBs' profitability. Meanwhile, NPF strengthens the effect of non-PLS financing on the IRBs' profitability. PLS financing with NPF can reduce the IRBs' profitability, and non-PLS financing with NPF can increase the IRBs' profitability. These findings explain why murabahah is still the dominant financing in Islamic banks. Islamic banks should strive to achieve their ideal form as a profit-sharing financial intermediary to respond to the criticism that there is no substantial difference between Islamic and conventional banks as both rely on fixed returns in the financing, perceived as similar to riba, prohibited in Islam.

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Section: Hypothesismentioning

confidence: 80%

“…In non-PLS financing, Pujiyanty, Puspita, & Mochlasin (2022) states that non-PLS moderated by NPF negatively and significantly affects profitability in Islamic Commercial Bank in Indonesia. Meanwhile, Masnah & Hendrawati (2020) state that non-PLS financing moderated by NPF positively and significantly affects profitability.…”

Section: Introductionmentioning

confidence: 99%

Are Sharia Financing Schemes Profitable? The Case of Islamic Rural Banks in Indonesia

Hidayah

Karimah²

2023

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“…Nevertheless, it does not apply to insolvency risk. Based on bank performance theory, bank performance is a matter that describes company performance achievements or the company's ability to work, which is supported by management in operational activities (Pujiyanty et al, 2022;Saputra & Lina, 2020). The research was found that Non-Performing Assets affect bank performance (Tanted et al, 2021).…”

Section: Finding and Discussionmentioning

confidence: 99%

“…Meanwhile, the ROA response to shocks caused by the inflation variable shows a negative response. An increase in CAR has a major influence on the income of Non-Foreign Islamic Commercial Banks and directly improves the condition of ROA which has decreased (Indriwati & Purwana, 2021;Pujiyanty et al, 2022). Variance decompression (VDC) aims to provide a large measure of the contribution or composition of the effect of each independent variable on the dependent variable (Wicaksono et al, 2023;Khasanah et al, 2021).…”

Section: Finding and Discussionmentioning

confidence: 99%

Islamic Commercial Bank Performance: The Nexuses by Financial Ratios, Macro Economics, And Financial Technology

Nurlaili,

Miranti

2023

MIEC

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The objective of this study is to examine the relationship between various factors and the performance of Islamic commercial banks in Indonesia over the next 12 periods. The variables considered include Non-Performing Assets, Capital Adequacy Ratio, Insolvency-risk, Inflation, Financial Technology, and Bank Size. The research methodology employed is a quantitative approach with a descriptive analysis. The sampling technique utilized is saturated sampling, resulting in a total of 96 data points. The findings indicate that the Non-Performing Assets (NPA) variable has a significant impact on Return on Assets (ROA), while the ROA variable does not significantly affect the NPA variable. Additionally, the inflation variable does not have a statistically significant effect on ROA, and vice versa. In the short term, the variables that influence bank performance are NPA, Capital Adequacy Ratio, Insolvency-risk, Financial Technology, and Bank Size. In the long term, significant factors influencing bank performance are NPA, Insolvency-risk, Financial Technology, and Bank Size. The Impulse Response Function (IRF) test demonstrates that ROA shows a positive response to the impact of NPA, Capital Adequacy Ratio, Inflation, Financial Technology, and Bank Size, while it exhibits a negative response to shocks caused by inflation. Throughout the study period, the variable with the greatest contribution remains Financial Technology, followed by other variables. Ultimately, the aim of this study is to provide insights for future policy implementation and decision-making within companies

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Examining the moderating effect of bank size on the financial risk and performance linkage of Islamic commercial banks

Asrori,

Amal,

Musyaffi

et al. 2024

CGOBR

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Financial performance is very important for Islamic banks to ensure the sustainability of their business in providing banking products and services according to Sharia principles or Islamic law. This research examines the impact of financial risk on the financial performance of Indonesian Islamic commercial banks (ICBs), with bank size as a moderating variable. The research was conducted on all Indonesian ICBs from 2017–2021. Fixed effects models are employed to account for potential heterogeneity across banks and control for time-invariant unobserved factors. These models allow for estimating the within-bank variation over time, capturing constant bank-specific characteristics over the study period. The results of this research state that financing and operational risks significantly negatively impact financial performance. In contrast, liquidity risk does not significantly negatively impact financial performance. Furthermore, from testing the moderation hypothesis, the results of this study state that total financing reduces the significant negative effect of financing risk and operational risk on ICB Indonesia’s financial performance. However, total financing does not reduce the significant negative effect of liquidity risk on the financial performance of Indonesian ICBs.

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Measuring the Role of Non-Performing Financing in Boosting Profitability of Islamic Commercial Banks

Cited by 3 publications

References 0 publications

Are Sharia Financing Schemes Profitable? The Case of Islamic Rural Banks in Indonesia

Are Sharia Financing Schemes Profitable? The Case of Islamic Rural Banks in Indonesia

Islamic Commercial Bank Performance: The Nexuses by Financial Ratios, Macro Economics, And Financial Technology

Examining the moderating effect of bank size on the financial risk and performance linkage of Islamic commercial banks

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