Model of Sharia Bank Profitability Determination Factors by Measuring Internal and Externals Variables

Abstract

This study examines the influence of internal and external factors on profitability as proxied by Return on Assets (ROA), a study on Islamic Commercial Banks for the 2016-2020 period. In the theory of profitability, there are 2 factors that affect bank profitability, namely internal factors and external factors. Internal factors in this study are BOPO (Operating Expenses to Operating Income), Non-Performing Financing (NPF), Financial to Deposit Ratio (FDR) and external factors in this study are inflation and the money supply. Profitability is one of the most important factors in a company, including Islamic financial institutions, in this case Islamic banks, so that every company must pay attention to the company's profitability ratios. Islamic banks are financial institutions that just started to emerge in the late 90s and have a very high level of competition with conventional banks. For this reason, this study aims to look at the financial performance of Islamic banks in Indonesia through the level of profitability they have had for the last 5 years. The sample selection in this study used purposive sampling method. The sample in this study is the monthly financial statements of Islamic commercial banks in Indonesia in 2016-2020. The data in this study will be processed using SPSS software with multiple regression. The results of this study state that inflation as an external factor does not have a significant effect on the profitability of Islamic Commercial Banks as measured by the Return on Assets (ROA) ratio with a significance level of 0.628 and the money supply has a significant effect on ROA. While the BOPO, NPF and FDR variables as internal factors have a significant effect on ROA.

The Impact of Operating Efficiency, Non-Interest Income, and Bank Size on Profitability: Evidence from the Ethiopian Banking Sector

“…presents the results of the xed effects model for the variable PROFF (pro tability), and the ndings align with previous studies discussed. The variable OE (operating e ciency) shows a positive coe cient of 0.001, supporting the importance of operating e ciency in driving bank pro tability(Sihotang, Hasanah, & Hayati, 2022). The variable NI (non-interest income ratio) has a statistically signi cant negative coe cient of -0.001, con rming previous research that a higher proportion of noninterest income relative to total assets is associated with lower pro tability(Ahamed, 2017).…”

“…To shed light on this intricate relationship between operating e ciency, non-interest income, and bank pro tability, we draw upon the invaluable insights gleaned from diverse studies conducted in various contexts. We begin by exploring the model crafted by Sihotang, Hasanah, and Hayati (2022) to discern the factors that in uence the pro tability of sharia banks in Indonesia. This model is especially signi cant as it stresses the importance of considering both internal and external variables, thereby enhancing our understanding of the determinants of bank pro tability within the unique context of Ethiopian banking.…”

Analisis Kinerja Perbankan Syariah 2018-2022 Dengan Menggunakan Pendekatan Islamicity Performance Index

“…6/23/DPNP 2004). Nilai BOPO yang terlalu tinggi akan berdampak buruk pada kinerja syariah bank yang secara otomatis dapat menurunkan profitabilitas (Sihotang et al, 2022).…”

“…NPF merupakan rasio yang yang menunjukkan tingkat non melakukan pembiayaan yang terdapat pada perbankan syariah, peningkatam NPF yang besar menyebabkan masalah pada kesehatan bank, semakin tinggi rasio NPF suatu Bank syariah menunjukkan bahwa bank tersebut memiliki Not Performing financing yang tinggi pula, otomatis akan menurunkan tingkat profitabilitas bank tersebut (Sihotang et al, 2022). 1.…”

Islamic Views and Calls to Invest According to the Al-Qur'an Surah Al-Hashr Verse 18

“…As time goes by and the pace of development of Islamic Banks, many people take advantage of the booming moments of Islamic Banks in ways that are not elegant, violate Sharia, and are irresponsible. Business in the banking world is also growing, not only as an intermediary but has penetrated the investment world (Sihotang, Hasanah, & Hayati, 2022). The bank can become an investor, and can also provide funds for people who need funds to be invested.…”