Islamic Banks In Indonesia Research Articles

MANAGING FINANCING RISK OF ISLAMIC BANKING PRODUCTS IN INDONESIA: A VALUE AT RISK APPROACH

This study aims to assess the potential risk and anticipated returns of equity and debt-based financing products in Islamic banking in Indonesia, represented by the three most prevalent contracts: musharakah, mudharabah, and murabahah. Data was collected from banks' monthly financial reports published on the Indonesia Financial Service Authority (OJK) website from 2014 to 2020, resulting in 82 observations. Data analysis was conducted using the Value at Risk (VaR) method with the variance-covariance approach. Among many methods, VaR is one of the most popular techniques that yields the most comprehensive results in measuring risk and return. The findings reveal that, in general, all equity and debt-based financing yielded stable risk and returns. However, equity-based financing produced higher returns, but also generated higher risks due to its uncertain nature. The results also demonstrate that risk management in Islamic banks improved gradually during the observation period, as indicated by the average score of portfolio combinations. These findings suggest that Islamic banks should balance their product offerings between equity-based financing and debt-based financing while simultaneously strengthening risk management, especially for murabahah products in equity-based financing.

Ownership structure, board characteristics, and performance of Indonesian Islamic rural banks

PurposeThis study aims to examine the influence of ownership structure and board characteristics on the performance of Indonesian Islamic rural banks (IRB) using the system generalized method of moment model.Design/methodology/approachThis research uses Indonesian IRB unbalanced annual panel data from 2016 to 2022. IRB performance is measured by return on assets (ROA), return on equity (ROE) and nonperforming financing (NPF). The ownership structure is represented by controlling shareholders, ownership of the board of directors (BD) and ownership of the board of commissioners (BC). Meanwhile, board characteristics are represented by the size of the BC, the proportion of female board directors and female president directors.FindingsThe results show that the ownership structure and board characteristics play an important role in improving the IRB’s performance. Technically, the results show that the size of the BC and the ownership of the BD increase all IRB performance measures. Female president directors and controlling shareholders improve IRB’s performance as measured by ROA and ROE. Women’s boards of directors improve IRB performance as measured by NPF. Meanwhile, the ownership of the BC does not show its effect on all IRB performance measures.Research limitations/implicationsThis study fills a literature gap on the influence of ownership structure and board characteristics on IRB Indonesia’s performance. In addition, it adds understanding and insight for Islamic bank regulators, management and IRB depositors in Indonesia.Originality/valueTo the best of the authors’ knowledge, this study is one of the first to provide an empirical survey on the influence of controlling shareholders and board characteristics on IRB performance, particularly in Indonesia.

Measuring bank service quality and recommendations for improvement: A case of Indonesia

The purpose of this study was to assess service quality and recommend improvements to the Indonesian Islamic Bank. A modified bank SERVQUAL and Service Performance Control Matrix (SPCM) were used in this study. The service quality was evaluated based on customer perceptions and their desired and minimum levels of expectations. This study used a set of questionnaires with a 35-item scale comprising seven dimensions: effectiveness and assurance, access, price, tangibles, service portfolio, reliability, and compliance. The data was collected using a survey, and 193 responses were received. The findings disclosed that the bank customer's perception of the service provided exceeded their minimum expectations but fell short of their desired expectations. By mapping the service performance into the matrix, it was determined that no services fell within the excellent zone, three services were classified in the problematic zone, and the majority of services fell within the improvement zone. The focus was placed on the problematic zone, which consisted of an insufficient number of bank tellers, a lengthy line, and inadequate parking space. However, no Islamic compliance issues were discovered within the problematic zone. Several recommendations were made to bank management to address the service problems, including encouraging customers to use digital banking services, expanding the number of drive-thru Automated Teller Machines (ATMs), and examining the appropriateness of bank staff engaging with customers, particularly during the busiest period of the month.

Safeguarding Stability and Enhancing Profitability: The Case of Islamic Banking in Indonesia

This study examines the impact of crises, non-performing financing variables, exchange rates, inflation, and interest rates on Islamic banks' short-term and long-term profitability in Indonesia. Profitability (ROA) fluctuations are also assessed in consideration of exogenous shocks. This analysis uses the Vector Error Correction Model (VECM) to examine monthly data from 2007 to 2023. The results suggest that non-performing financing (NPF), exchange rates (BIRT), and inflation (IFLS) have a substantial impact on the long term. While the crisis variable exhibits a relatively less substantial influence, interest rates reveal distinct short-term and long-term impacts. The Impulse Response Function data indicate that NPF, KURS, and IFLS have a negligible effect on ROA. NPF primarily influences ROA variation, as determined by the Forecast Error Variance Decomposition; KURS follows suit. Islamic Banks' management must diligently oversee non-performing loans, exchange rates, and inflation and astutely devise interest rate strategies. The factors impacting the profitability of Islamic banks in Indonesia are thoroughly examined in this study.

Financial Performance of Islamic Commercial Banks Through Efficiency Levels and Non-Performing Financing Before and During The Covid-19 Pandemic

The real sector and the financial sector have been affected by the Covid-19 pandemic for approximately 2 years. It condition makes the banking financial sector pay attention to the level of operational expenses efficiency and be careful in channeling financing in order to reduce the occurrence of bad financing caused by defaults from customers. Analysis of the capabilities of Islamic banks in Indonesia in terms of operational cost efficiency and managing problematic financing in conditions before and during the Covid-19 pandemic so that the ability of Islamic banks to manage their financial performance will be known is the aim of this research. Saturated sampling was the technique for sampling this research from the research population of 14 Islamic commercial banks in Indonesia. Documentation is used as a technique in collecting data from the combined financial reports of 14 Islamic commercial banks. Data before the pandemic can be seen from the 2018-2019 financial reports, while 2020-2021 data during the pandemic. Paired sample t-test with Jamovi media was used as a data analysis technique. The findings of this research show that during the Covid-19 pandemic, the level of efficiency and non-performing financing of Islamic banks has decreased, meaning that the financial performance of Islamic banks is better and operating costs are more efficient, problem financing is reduced, so that the potential for increased profitability is higher. Keywords: operating expenses and operational income, non-performing financing, financial performance, Islamic banking, covid-19.

Juridical Review of Net Revenue Sharing and Profit Sharing Implementation In Islamic Bank

Islamic economic and financial systems are based on the achievement of justice and equitable distribution of economic welfare as well as universal ethical values that can be accepted by various parties. This study aims to determine the legal basis for the application of net revenue sharing and profit sharing methods in Islamic banks. The method used is normative juridical approach, data collection techniques using literature study and field study, data analysis using qualitative normative analysis. The results mentioned that the regulation of net revenue sharing and profit sharing of Islamic banks in Indonesia is contained in Article 26 of Law Number 21 of 2008 concerning Islamic Banking on the operational principles of Islamic banks, DSN MUI fatwa Number 15/DSN-MUI/IX/2000 on the principle of distribution of business results in Islamic financial institutions and PBI Number 7/46/PBI/2005 concerning the collection of funds and distribution of funds for parties carrying out business activities based on sharia principles.

E-Servqual Digitalization Of Islamic Banks And Customer Retention In Surakarta

This study aims to determine the effect of banking digitalization service quality on customer loyalty of Islamic banks in Surakarta city. This type of research is quantitative research with a sample of 100 bank customers who use Islamic bank digital services, using primary data obtained through direct distribution of a questionnaire with a Likert scale, the data is processed using multiple linear regression analysis. The research proves that efficiency, reliability, fulfillment, privacy, responsiveness has no significant effect on customer retention in using bank digital services, as evidenced by the statistical value of each variable, namely 0.763, 0.727, 0.083, 0.225, 0.093 greater than 0.05. Contact has a positive and significant effect on customer retention in the use of digital banking services with a statistical value of 0.012 less than 0.05. This research has implications for strengthening strategies and services in the use of digital FinTech by Islamic banks in Indonesia

Analisis Strategi Pemasaran Pembiayaan Murabahah pada Produk Cicil Emas dalam Meningkatkan Jumlah Nasabah: Studi Kasus BSI KCP. Medan Marelan

The development of the world of Islamic banking in Indonesia has grown rapidly. Where Islamic banking products must have the right strategy. There is no visible marketing strategy that has taken place at BSI KCP. Medan Marelan where there has been a decrease in the number of gold installment product customers at BSI KCP. Medan Marelan and the lack of public understanding of the benefits of owning gold installment products. The background of this research is to find out the company's strategy in an effort to increase the number of customers of Cicil Emas products at BSI KCP. Medan Marelan.The research method used is field research (field research) which is descriptive qualitative. Data collection techniques were carried out through observation, interviews and documentation with the BSI KCP. Medan Marelan, Based on the results of the research conducted, it can be concluded that in maintaining and improving BSI KCP. Medan Marelan has several marketing strategies, namely using a marketing mix consisting of 7P (product, price, place, promotion, people, physical evidence, process)

Integration of financing and macroeconomic shock in Islamic banking in Indonesia

Purpose – This study analyzes the relationship between Islamic banking financing and macroeconomic variables as well as its response to key economic variables.Methodology – The research design uses quantitative analysis with Islamic banking panel data for the period 2019-2022 with monthly data, and the study used the Vector Error Correction Model (VECM).Findings – Non Performing Financing (NPF) and Inflation negatively impact Islamic banking financing. Meanwhile, Third Party Funds (Dana Pihak Ketiga, DPK), Net Operating Margin (NOM), Return on Assets (ROA), Equivalent Rate of Musyarakah (ERPMUSY), and BI rates have a positive direction of significance for Islamic banking financing. In the Granger causality test, the interaction between the variables was unidirectional. While Islamic banking financing responds to shocks, many financings respond negatively to the shocks that occur.Implications – Islamic Financing responds significantly in a negative direction as a result of the shocks that occur in each variable and based on long-term estimates. Therefore, Islamic banking needs to supervise and resolve the internal influence of each bank, as well as the macro influence that can be felt in the long term on Islamic banking financing.Originality – This research integrates Islamic banking finance in Indonesia and examines how internal and macro variables can influence the financing disbursed to Islamic banking in Indonesia. This study also examines shocks between variables and tests the Granger causality between variables. Islamic banking needs to pay attention to many factors to minimize bad financing or lack of interest in applying for financing.

Are the Financial Indicators Relevant in Measuring the Performance of Islamic Banks?

This study was directed to determine the impact of financial indicators compiled in public reports on the long-term and short-term performance of Islamic banks in Indonesia. The scope of this study is between 2017 and 2021. This study uses the Vector Error Correction Model (VECM) method. The analytical steps used in VECM modeling are Granger causality, long-term and short-term VECM analysis, impulse response functions, and variance decomposition. Results of this study show that the independent variables subsisting of BOPO, CAR, FDR, MFP, NPF, and STM have long-term effects on ROA. However, CAR variables do not show significant impacts in the short term. The implications of this research are to back business efficiency in other banking services such as safe deposit boxes, hedging activities, and manufacturing sector financing based on more accountable and credible risk management. The freshness of this study is that it incorporates the results of Granger causality analysis, which reveals bidirectional relationships for each variable. In addition, Granger causality shows correlations, allowing study variables to be explored more deeply in further studies.
 Keywords: financial indicators, Vector Error Correction Models, Islamic banks, performance

POTENSI BISNIS PERBANKAN SYARIAH INDONESIA TAHUN 2024: PELUANG DAN TANTANGAN

This study analyzes the growth outlook, opportunities, and challenges for Islamic banking in Indonesia approaching the 2024 vision to become the global Islamic economic hub. Despite positive historical trends, research comprehensively examining medium-term projections across key metrics and strategic policy implications is limited. This paper addresses the gap through qualitative interviews with experts to forecast growth in assets, financing, and customers by 2024. High potentials in untapped markets are weighed against challenges in accelerating digital transformation and reforms needed in regulation, technology, and human resources. Key recommendations will be presented for regulators and industry players to optimize growth momentum amidst Indonesia’s Islamic economy goals. The results are expected to enrich academic literature and provide regulators and practitioners strategic inputs to strengthen policies, infrastructure, capabilities, and market access. Further quantitative research can build upon these findings for deeper projections and insights forward.
 
 Keywords: Islamic banking, Islamic finance, prospects, challenges, policy, Indonesia

Indonesia Islamic Bank Development: An Interpretive Structural Modeling (ISM)

This research is aim to identify the priority factors that being barrier to develop Islamic bank in Indonesia using Interpretive Structural Modeling (ISM) method. Here is also offered some solutions for the problems identified. ISM is an advanced planning methodology used to identify, analyze and summarize various relationship among factors that define a problem, model or issue. The development of Islamic bank in Indonesia with ISM framework is divided into three criteria: (1) Strategy or foundation required within the framework of developing Islamic banks, and (2) Stakeholders or actors involved in the development of Islamic banks in Indonesia. Result show that the core strategies or foundations that’s needed in framework of Islamic banking development in Indonesia are: The improvement of public literation and preference, Strengthening and align ruling and supervision, Strengthening policy synergy between the stakeholders and Improvement quality and quantity of human resources, information system & technology and other infrastructures.

Perbandingan Kinerja Bank Konvensional dan Bank Syariah pada Triwulan IV 2022

This research analyzes the performance of Conventional Banks and Islamic Banks in Indonesia in the fourth quarter of 2022 using data from the official website of the Financial Services Authority (OJK). The study employs a qualitative descriptive approach. The text above discusses the performance comparison between conventional commercial banks (BUK) and Islamic banks (BUS) in several key aspects. Islamic banks show higher asset growth, reaching 15.57%, compared to the 9.42% growth in assets of conventional commercial banks. The composition of their assets also differs, with conventional banks focusing more on credit, while Islamic banks emphasize financing. Overall, both Conventional Banks and Islamic Banks demonstrate positive performance in the second quarter of 2022, with strategies such as diversified funding sources, increased productive credit, and operational efficiency being key drivers of growth amid the continually changing economic dynamics. This conclusion reflects the commitment of the banking sector to support Indonesia's economic growth.

Financial Statement Fraud of Indonesian Islamic Banks

Objective: Financial statement fraud (FSF) in Islamic institutions is considered unethical due to its production of inaccurate information for stakeholders. In this study, we examine some institutional characteristics, particularly those pertaining to corporate governance, that have the potential to regulate the occurrence of financial statement fraud (FSF). Methodology: Data was gathered quantitatively. Thel study utilizeld a samplel including 11 commelrcial Islamic banks opelrating in Indonelsia. Thel obselrvation pelriod spanneld from 2019 to 2022. Result: Through an examination of Islamic banks in Indonesia, it was observed that some characteristics of the Sharia Supervisory Board (SSB) of these banks, including their level of knowledge, the size of the board, and the frequency of their meetings, had the potential to mitigate Financial Statement Fraud (FSF). In addition, the composition of the audit committee and the perceived credibility of the external auditors can also contribute to the effective management of financial statement fraud. This study does not identify any significant impact of the board of commissioners' structure on the financial stability of the firm (FSF). One additional discovery pertains to the three SSB traits examined in this study, with the most significant impact on regulating FSF being the specialised knowledge and proficiency in accounting, finance, or economics possessed by each SSB. Conclusion: It is recommended that each Sharia Supervisory Board (SSB) be equipped with professionals in relevant disciplines, in addition to their experience in Islamic jurisprudence.

Perspektif Hukum Islam terhadap Biaya Administrasi Transfer Dana melalui BSI Mobile

The presence of Islamic banks in Indonesia since the late 19th century and their development to the present day has helped us understand the importance of Islamic economics in Indonesia. This research uses library research methods, collecting data or scholarly writings as the research object, gathering library data, or studies conducted to solve a problem. The Fiqh Muamalah analysis shows that fund transfer transactions between banks through the BSI Mobile application are allowed because they avoid riba, maisir, gharar, tadlis, and facilitate fund transfer transactions between different banks. In addition, the contracts used are also in accordance with the Fatwa DSN MUI No. 10/DSN-MUI/IV/2000 on Wakalah and Fatwa DSN MUI No. 113/DSN-MUI/IX/2017 on Wakalah bi al-Ujrah.

Pengaruh Inflasi dan GDP terhadap Tingkat Kesehatan Bank Syariah dengan Size sebagai Pembeda

The research aims to determine the impact of Inflation and Gross Domestic Product (GDP) on the health level of Islamic Banks in Indonesia from 2014 to 2020 with size as the differentiator. The population in this study is 14 Banking Companies from 2014 to 2020 registered with the Financial Services Authority (OJK), and using a purposive sampling technique, 14 banks were select as the research sample. The analysis method used is the panel data analysis method using Eviews 12. The health level of the Islamic Commercial Bank is calculate using the RGEC method is measured using Non-Performing Financing (NPF), Financing to Deposit Ratio (FDR), Return on Assets (ROA), and Capital Adequacy Ratio (CAR). The result of this study shows that inflation and GDP do not have a significant effect on NPF, FDR, and ROA. Meanwhile, inflation and GDP have a significant effect on the CAR Small size.

Exploring how good corporate governance shapes financial performance

This research aims to comprehensively investigate the impact of Sharia Supervisory Board, Board of Commissioners, Board of Directors, and Audit Committee on the financial performance of Islamic banks in Indonesia through a literature review approach. Utilizing the SINTA database as the primary source, the study will identify, select, and analyze relevant literature to understand the extent of each supervisory entity's influence on the financial performance. According to the analyzed literatures, the Sharia Supervisory Board profoundly influences Islamic financial institutions, ensuring adherence to Sharia principles, building trust, and mitigating risks, positively impacting financial performance. The Board of Commissioners, integral in strategic decisions, risk management, and governance, shapes overall financial well-being. The Board of Directors significantly influences financial outcomes, overseeing transparency and regulatory compliance. The proposed commissioners' board, with an independent judiciary, aims for unbiased management evaluations, essential for good corporate governance. Lastly, the Audit Committee enhances financial performance by ensuring transparency and mitigating risks, a crucial component mandated for public companies in Indonesia.

Manajemen Aset dan Liabilitas dalam Bank Syariah: Analisis Komprehensif Institusi Keuangan Berprinsip Syariah

The Islamic banking industry in Indonesia, since the establishment of Bank Muamalat Indonesia in 1991, has experienced rapid growth, reaching its peak in 2019. This growth is evident not only in financial aspects but also involves a broader performance assessment, including Sharia principles and organizational governance. The assets of Islamic banks have achieved remarkable milestones, strengthening Indonesia's position as a key player in the global Islamic banking arena. New approaches such as the Sharia Maqhasid Index (SMI) highlight the attainment of Sharia goals, while fund management and the phenomenon of mergers between BRIS, Mandiri Syariah, and BNI Syariah forming Bank Syariah Indonesia (BSI) underscore the urgency of assessing asset liability management in the context of sustainability in Indonesia's Islamic banking sector.

Contracting Balance in Islamic Banking Mudharabah Agreements in Indonesia: Islamic Economic Perspective

The purpose of this study is to determine the position of mudharabah contracts in fiqh and the practice of mudharabah contracts in Islamic banking in Indonesia in general. The research method used by the author in this research is literature review, data collection through several journals, and several other references, then data analysis uses review analysis using data reduction, systematic and objective. The results of this study reveal that the mudharabah contract is a collaboration between the owner of the funds or investors (shaihb al-mal / rabb al-mal / investors) and the manager of capital (mudharib) to do business on the basis of a profit sharing ratio. Although mudharabah contracts have no basis in the Koran or implicit sunnah, they were used to carry out trade by the early generations of Muslims. Contracts are developed by the Fuqaha under conditions on his behalf based on general sharia principles of fairness. Islamic banking practices in carrying out mudharabah contracts as financing in the case of mudharabah contracts are one of the banking products, namely in the form of time savings, for example hajj savings, sacrifices, and special savings (special investments)

Understood or Forced: Reviewing Lecturers' Interest in Saving in Islamic Banks

Understanding Islamic banking can be applied properly but has not fully positively influenced the intention to save in Islamic banking. Lack of interest and customer trust in Islamic banking to save in Islamic banking so there is a need for socialization of Islamic banking knowledge itself, both regarding understanding, of products, principles, and contracts used by parties from Islamic banks. In addition, some opinions also state that it is normal for lecturers at Islamic religious colleges to save in Islamic banks because they are required to open savings accounts to receive their salary through Islamic banks. Based on the description of the problem, the researcher is interested in conducting further research to prove whether the understanding of Islamic banking on lecturers' interest in saving in Islamic banking can maximize or have a positive effect on saving or not saving in Islamic banks. The discussion of this research relates to the field of science in connection with that the approach taken in theories related to understanding and interest. This research is quantitative. The samples used in this study were 34 lecturers. Data collection techniques used are interview techniques, distributing questionnaires, and documentation. The analysis technique of this research uses a validity test, reliability test, normality test, linearity test, classical assumption test, simple linear regression test, and hypothesis test with the help of SPSS version 26 software. The results of the study show that lecturer knowledge influences people's interest in saving at Islamic banks. This of course can prove that Indonesian Islamic banks have a place in the hearts of lecturers, not only because of the obligation to open an account at an Islamic bank to get a salary as a lecturer.