LENDING GROWTH AS A FIQH IMPLICATION TOWARD PRODUCT DEVELOPMENT OF ISLAMIC BANK IN INDONESIA

Riris Aishah Prasetyowati

doi:10.32832/inovator.v6i2.1047

Abstract

This study aim to examine the financing growth of Islamic bank in Indonesia with the provisions system and proof that there is a procyclicality and income smoothing behavior of bank manager. The objects of this study are Islamic Banks and Islamic Business Unit in Indonesia period of 2000 – 2016. This study specifically estimates a different calculation in every component of discretionary and non-discretionary in Islamic bank financing with the variable controlsuch as deposit growth, equity ratio, and total asset. The equation will be tested by using the regression system estimation and the validity tested by AR and Hansen test. The result of this study quantitatively proved that there is a pattern of procyclicality behavior in Islamic bank consistent with hypothesis and significantly has negative correlation described by the relation of loan loss provision with the coefficient of GDP growth rate: -0,207. From this result in accordance with the fiqh platform, for all forms of muamalah is “al ashlufilmu?amalahilla al-ibahahyadulludaliil „alaatahriimiha” (the origin of everything is allowed unless there is proof that forbid it), which means that by using the theory of fiqh rules the product development of Islamic bank can be done and expanded.

Highlights

Penelitian ini bertujuan untuk menguji pertumbuhan pembiayaan bank syariah di Indonesia dengan sistem ketentuan dan bukti bahwa ada kecenderungan procyclicality dan perilaku perataan laba manajer bank
According to Yaziz (2011), to improve financing growth from sharia perspectivefor financing risk and loan loss provisions in Islamic bank, there are two perceptions: first is the perception of sharia financing risk as a basis for assessing the quality of financing, and the second is the perception of allowance incentive for loan loss provisions used by Islamic bank in achieving a certain goals
The loan loss provisions decline when economic growth strengthened, and this procyclicality behavior can sharpen the decline of economic growth through the reduction of financing

Summary

INTRODUCTION

Islamic Bank in its effort to improve provisions during the decent time. So, the the financing growth should be aware of the risk payment failure in financing that can be input and basis for making the bank‟s profitability calculation, capital adequacy, solvency, and the calculation of the allowance incentive financing loss reserves (Dermine and Carvalho, 2006). The fact that Islamic bank in expanding its financing shows the behavior of procyclicality It occurs because the bank managers increase the provisions during 72 implications of procyclicality is provoking a financing crisis and exacerbate the economic recession (Adzis et al, 2015). This study examines the growth of Islamic bank financing in Indonesia with the provisions system that used in order to obtain the result as a proof that there is a procyclicality behavior and income smoothing behavior of bank manager. This result will be diagnosed in a qualitative analysis based onfiqh platform in order to generate some implications for regulators, society, and further research. It is expected that operational activities of Islamic bank in Indonesia for the benefit of capitalist

LITERATURE REVIEW Theory of Sharia Financing

RESULT