Determinants of Financial Performance with Islamic Financial Technology Moderation in Sharia Commercial Banks in Indonesia

Abstract

The research aims to examine and analyze the determinants of financial performance with the moderation of Islamic financial technology in Islamic commercial banks in Indonesia. The type of research used is classified as quantitative with an explanatory approach. The data used in this study is a type of secondary data. The population and sample in this study are six Islamic commercial banks registered with the Indonesian Financial Services Authority (OJK). Data management and analysis techniques were carried out by inferential analysis and Partial Least squares (PLS). The results of the Direct Effect Research show that: 1) firm size has a negative and significant effect on Financial Performance in Islamic commercial banks in Indonesia. 2) the current and debt-to-equity ratios have a negative and insignificant effect on Financial Performance in Islamic commercial banks in Indonesia. 3) Moderation of Islamic Fintech significantly strengthens the influence of Firm Size on Financial Performance in Islamic commercial banks in Indonesia. 4) Moderation of Islamic Fintech significantly strengthens the influence of the Current Ratio on the Financial Performance of Islamic commercial banks in Indonesia. 5) Moderation of Islamic Fintech significantly strengthens the influence of the debt-to-equity ratio on the Financial Performance of Islamic commercial banks in Indonesia. This study concludes that: 1) firm size with many total assets does not necessarily mean the company has a significant profit. It could decrease company profitability if these assets are not utilized and managed properly and efficiently. Companies with significant assets can utilize and support business development operations to maximize profits and increase company profitability. 3) The high current ratio indicates excess current assets, affecting the company’s profitability. The reason is that a high current ratio is only sometimes good because it will show excess current assets that are not used effectively, which can lead to a smaller level of profit or profitability, resulting in lower profitability. 3) a high debt-to-equity ratio indicates the availability of significant funds from the use of debt for company operations to increase the profitability of Islamic banks. Banks that finance their assets with debt cause their profitability to decrease because banks have to pay the costs that must be incurred due to the use of debt. 4) With Islamic fintech as a moderator between firm size, current ratio, and debt to equity ratio, Islamic fintech can optimize financial performance because by adopting fintech in Islamic banking among the public, it is easier to transact online because Islamic Fintech provides various services such as payment zakat, health, and lending as well as transfers between banks.