Factors Influencing Third-Party Funds of Islamic Bank: A Case Study in Indonesia

Abstract

This study examines the factors influencing the Third Party Fund (TPF) of Islamic Banks in Indonesia, with a focus on the constructs of Size (Total Assets), Liquidity (measured by the Financing to Deposit Ratio), and Gross Domestic Product (GDP). The data for the study were collected from five Islamic Banks over a period of five years, resulting in a dataset of 100 observations. The research employs a quantitative research method, utilizing multiple linear regression. The results of the analysis indicate that both Size and Liquidity have a significant positive impact on TPF, suggesting that higher levels of Size (Total Assets) and favourable liquidity conditions can contribute to an increase in TPF. However, the hypothesis regarding the impact of GDP on TPF was not supported, indicating that GDP does not have a significant relationship with TPF in this context. These findings have important implications for the management of Islamic Banks in Indonesia. Bank managers should prioritize strategies that enhance liquidity management and ensure sufficient total assets. By maintaining favourable liquidity conditions and expanding total assets, banks can attract more Third-Party Funds, thus fostering growth and stability in the Islamic banking sector. Furthermore, the study highlights the role of regulatory oversight in maintaining public trust in Islamic Banks. Effective regulatory frameworks and supervision are crucial in ensuring compliance with Islamic principles and promoting public confidence. In conclusion, this study provides valuable insights into the factors influencing TPF in Islamic Banks in Indonesia.