FACTORS AFFECTING RETURN ON DEPOSIT (ROD) OF SHARIA BANKS IN INDONESIA

Sugeng Wahyudi,Deki Nofendi,Robiyanto Robiyanto,Hersugondo Hersugondo

doi:10.3846/btp.2018.17

Sugeng Wahyudi, Deki Nofendi + Show 2 more

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https://doi.org/10.3846/btp.2018.17

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Abstract

This study examines the effect of Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), board of directors’ size (BOARD), sharia supervisory board (DPS), bank size (SIZE), and interest rate (INT) and sharia bank ownership status (DFOR) to Return on Deposit (ROD). The sample used in this research is 11 sharia banks operating in Indonesia. By using multiple regression analysis technique, it was found that CAR and SIZE have a significant negative effect on ROD) of sharia banks in Indonesia. While the FDR, BOARD and INT have a significant positive effect on ROD of sharia banks in Indonesia. Meanwhile, DPS and DFOR have no significant effect on ROD of sharia bank in Indonesia.

Highlights

IntroductionIslamic banking (sharia banking) arises because Islam forbids Muslims to withdraw or pay interest (usury, riba)
Islamic banking arises because Islam forbids Muslims to withdraw or pay interest
The influence of foreign ownership on Return on Deposit (ROD) This study found that the ownership status (DFOR) of sharia banks did not have a significant effect on ROD

Summary

Introduction

Islamic banking (sharia banking) arises because Islam forbids Muslims to withdraw or pay interest (usury, riba). Islam’s rejection of this interest raises the question of what can replace the mechanism of application of interest within the framework of Islam. This is where the principle of profit sharing (profit-loss-sharing) entry replaces the interest system as in conventional banks (Ernayani et al 2017, Ismal 2009, Majid et al 2014). According to Khediri et al (2015), there are many differences between sharia banks and conventional banks. Interest-based contracts in conventional banks are replaced by yield-based contracts with sharia banks, where profits and losses, as well as risks, are shared between creditors and borrowers. Sharia banking is an institution in the field of economy, and as an institution that is responsible for maintaining moral and morals of society (Hassan and Aliyu 2018)

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