S haria P rinciple C ompliance M odel Between Islamic Financial Performance and Social Performance Evidence from Indonesia

Fitrini Mansur,Doctoral Student, Economics At Jambi University, Jambi, Indonesia ,Afrizal Lecturer,The Faculty Of Economics And Business, Jambi University, Jambi, Indonesia ,Achmad Hizazi, ,Sri Rahayu

doi:10.35940/ijrte.d6560.1110421

Fitrini Mansur, Doctoral Student, Economics At Jambi University, Jambi, Indonesia + Show 5 more

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https://doi.org/10.35940/ijrte.d6560.1110421

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Abstract

This study aims to explain the effect of compliance with sharia principles on sharia financial performance and its implications for Islamic social responsibility. This type of research is descriptive verification. The data used is the annual report of Islamic commercial banks in Indonesia. Data analysis using SEM PLS. The results of the study indicate that compliance with sharia principles has an effect on sharia financial performance and Islamic social responsibility. Through sharia financial performance, compliance with sharia principles has an effect on Islamic social responsibility. Islamic financial performance has an effect on Islamic social responsibility. The results of the study prove that Islamic commercial banks in carrying out their operational activities absolutely must be based on sharia because Islamic commercial banks are not only responsible to the owner but to Allah SWT. The compliance of sharia commercial banks with sharia principles fosters public trust in sharia commercial banks.

Highlights

The development of Islamic banking in recent times is quite slow when viewed from the Islamic/Sharia Financial System (Islamic Financing System/IFS) because it still has a very small market share
Mehdi [13] examines the impact of the introduction of the Shariah-compliant Index (SI) on the performance and liquidity of the shares included in Bursa Malaysia, the results show that, overall, the Shariah-compliant Index (SI) has a positive impact on the financial performance of the shares included
The sampling technique used a purposive sampling technique with the following criteria: (1) Islamic commercial banks operating in Indonesia: (2) Sharia Commercial Banks periodically submit annual reports issued for the 2015-2019 period on the official website of each bank

Summary

Introduction

The development of Islamic banking in recent times is quite slow when viewed from the Islamic/Sharia Financial System (Islamic Financing System/IFS) because it still has a very small market share. Until the end of 2019, Indonesia's Islamic finance market share only reached 9.01% of national financial assets, and the size of Islamic banking assets compared to the total national banking assets of 5.96%. This slowing growth movement of Islamic banking leads to a lower share of assets, third party funds, and financing of Islamic banks compared to the share of conventional banks (OJK, 2019).

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