Islamic Banks In Indonesia Research Articles

The Role of Worship Values in Enhancing the Efficiency of Islamic Commercial Banks: A Data Envelopment Analysis (DEA) Approach

This study investigates the efficiency of Islamic banking in Indonesia from 2018 to 2021 through the application of Data Envelopment Analysis (DEA), incorporating Islamic principles. The analysis utilizes secondary financial data from four Islamic banks, sourced from the Financial Services Authority (OJK) and other researchers. The input variables considered include third-party funds allocated for profit-sharing and labor costs, while the output variables consist of revenue derived from the management of public funds and other operational income. The DEA results indicate fluctuating efficiency levels among the Islamic banks, with Bank Syariah Y consistently achieving 100% efficiency, signifying its status as the most efficient institution. The study identifies that revenue from public fund management negatively impacts the growth of Islamic banks, whereas labor costs and other operational income positively influence their development. These findings highlight areas requiring improvement and the factors driving efficiency in the development of Islamic banking in Indonesia.

The Impact Of Economic Contraction On The Financing Collectability Of Islamic Banking In Indonesia

The COVID-19 pandemic affected Indonesia's economic growth, which experienced a contraction in the first and second quarters of 2020. This study examines how economic contraction affects the collectability of Islamic banking in Indonesia, period for 2019: IV - 2020: II. The measurement of financial collectability is based on non-performing financing (NPF). The research data source comes from secondary data in publications from the Central Statistics Agency (CSA) and the Financial Services Authority (FSA). Data analysis uses descriptive statistics with the help of percentages, growth, and graphs. The results indicated that the economic contraction significantly impacted the decline in Islamic banking performance, as evidenced by an increase in NPF. The NPF increase occurs in all debtor groups: MSMEs, non-MSMEs, and households (consumption financing). The collectability of financing is separate from the area where COVID-19 spreads; where DKI Jakarta, East Java, and West Java are in the top five highest COVID-19 cases, they have better financing collectability than other provinces. Based on economic sectors, only mining and quarrying did not experience an increase in the NPF during the economic contraction period. These findings show differences with the growth-led finance paradigm. Regions that experience high cases of COVID-19 infection have better financing collectability. The practical implication of these findings is the importance of coordinating macro prudential policies with others, such as fiscal and actual sector policy, in encouraging the resilience of MSMEs, including managing the collectability of financing during economic contraction periods.

Islamic Work Ethics, Employee Response, and Job Satisfaction: An Exploration of Indonesian Islamic Banking Employees

Islamic Work Ethics, Employee Response, and Job Satisfaction: An Exploration of Indonesian Islamic Banking Employees

Legal Consequences in Murabahah Agreement Litigation Dispute Resolution: Analysis of Forum Choice Clauses in District Courts

The development of Islamic banking in Indonesia, with the Murabahah financing contract dominating, is not free from disputes among the parties involved. Dispute resolution can be settled out of court (non-litigation), one of which can be through the National Sharia Arbitration Board (Basyarnas) and through the Religious Courts (litigation). Legislation has regulated the absolute authority of the institution responsible for litigation dispute resolution through Article 49 letter (i) of Law Number 3 of 2006, as amended in Law Number 50 of 2009 Regarding the Second Amendment of Law Number 7 of 1989 and Article 55 paragraph (1) of Law Number 21 of 2008 Regarding Islamic Banking, namely the Religious Court. A conflict of norms appears in the Murabahah financing contract, which still includes a clause for dispute resolution litigation in the District Court. This raises the first issue formulation regarding what the legal consequences are for the parties in the Murabahah financing contract with the choice of forum clause in the District Court when resolving litigation disputes and what choice of forum clause is stipulated in the Murabahah financing contract to provide a balanced position for the parties when resolving litigation disputes.

RGEC-Based Comparative Study of Health Levels in Indonesia's Sharia Banks (2019-2023)

This research aims to analyze the comparative health ratings of Islamic banking using the RGEC method based on the regulations established by Otoritas Jasa Keuangan (OJK) No. 4/PJOK.03/2016 concerning the Assessment of Commercial Bank Health Levels. This study employs descriptive research with a quantitative approach. The data sources used include the annual reports and GCG reports of Islamic Banks from 2019 to 2023.The results of this study indicate that Islamic banks in Indonesia have achieved varied health ratings. Bank Aceh Syariah, Bank NTB Syariah, and BCA Syariah received the "very healthy" rating for their health assessment from 2019 to 2023. Meanwhile, Victoria Syariah received a "healthy" rating consistently over the five-year period. The other six Islamic banks showed varied results each year.

A Study of Qur'anic Verses on the Concept of Musyarakah: Study of the Contextual Tafsir of Abdullah Saeed

The paper wishes to present a study of verses of the Qur’an relating to cooperation in Abdullah Saeed’s view of profit sharing, an issue in the debate on Islamic banking in Indonesia. Researchers try to examine how Abdullah Saeed’s thoughts elaborate on profit sharing. Abdullah Saeed is an Australian scholar and scholar studying Islamic studies. He is an Omani Arabic and Islamic Studies Professor at the University of Melbourne. He is known for his progressive view on religious freedom in Islam.

Does Intellectual Capital Efficiency Translate into Financial Performance for Islamic Banks in Indonesia? Evidence from the Pre-Pandemic Period

This study investigates the determinants of financial performance in Indonesian Islamic banks, focusing on the Financing to Deposit Ratio (FDR) and Capital Adequacy Ratio (CAR) as key indicators. Utilizing data from Bank Syariah Indonesia (BSI) and Bank Muamalat Indonesia (BMI) between 2016 and 2020, the research employs Ordinary Least Squares (OLS) regression analysis to examine the influence of Human Capital Efficiency (HCE), Structural Capital Efficiency (SCE), and Capital Employed Efficiency (CEE) on FDR and CAR. The findings reveal that while CEE has a statistically significant negative relationship with FDR, the model for CAR lacks a statistically significant fit. This research contributes to understanding the role of intellectual capital in Islamic banking performance and offers insights for stakeholders in the Indonesian Islamic finance sector, with implications for the post-pandemic era.

Linkage Islamicity Performance Index and Islamic Corporate Governance throught Financial Health Performance of Indonesian Islamic Banks

Linkage Islamicity Performance Index and Islamic Corporate Governance throught Financial Health Performance of Indonesian Islamic Banks

The Influence of Product Diversification, Service Quality, and Risk Management of Islamic Banks on Money Market Stability in Indonesia

This study investigates the effect of Product Diversification, Risk Management, and Service Quality of Islamic banks on Money Market Stability in Indonesia. Using quantitative analysis based on Structural Equation Modeling with Partial Least Squares (SEM-PLS), data were collected through a survey of Islamic bank customers. The results reveal significant positive relationships between Product Diversification, Risk Management, Service Quality, and Money Market Stability. Product Diversification positively influences Service Quality and Risk Management, while Service Quality and Risk Management, in turn, positively impact Money Market Stability. The findings underscore the importance of adopting comprehensive strategies to enhance the stability of the money market in Indonesia's Islamic banking sector. These insights have implications for practitioners, policymakers, and researchers aiming to promote financial stability and inclusivity in Islamic finance.

Three research method approaches: musharaka financing performance model in Indonesian Islamic banks

Three research method approaches: musharaka financing performance model in Indonesian Islamic banks

Normative Review of Economic Democracy In The Indonesian Sharia Banking Legal Framework

This research is a normative review of economic democracy within the legal framework of Indonesian sharia banking. In this context, this article aims to explore how the principles of economic democracy are reflected in the legal regulation of Islamic banking in Indonesia. The research method used is a normative approach involving a literature review and legal analysis of sharia banking regulations in Indonesia. The research results show that bank regulations in Law no. 7 of 1992, Law no. 10 and 21 of 1998, as well as other regulations, consistently promote democratic principles in Indonesia's national financial system. The Indonesian sharia banking institutional system which began in December 1983 marked an important first step in integrating sharia principles into the national banking system. Apart from that, the importance of the prudential principle in regulating sharia banking in Indonesia is also emphasized in this research. The precautionary principle aims to ensure that banks operate legally and in accordance with the principles of sharia law, as well as to protect consumer interests. This research provides valuable insight into how economic democracy is reflected in Indonesia's Islamic banking legal framework. The implications of these findings can be used to increase understanding of the importance of economic democracy in building an inclusive and sustainable financial system in Indonesia.

Impact of Risk and Competition on Indonesian Islamic Bank Performance: Panel Data Evidence

This paper examines the impact of banking risk and competition on the performance of Islamic banks in Indonesia. The study used financing to deposit ratio (FDR) as a representation of liquidity risk, non-performing financing (NPF) as a representation of financing risk, and the operating expense ratio (BOPO) as a representation of operational risk. Regarding competition, market share (MS) and market concentration (MC) proxies by the Hirschman–Herfindahl Index (HHI) were used. Time series data were collected from 14 Islamic banks operating in Indonesia for the period 2010–2020 and the Least Square method was used. It was found that liquidity risk affects positively the profit of Islamic banks, while financing risk and operational risk impact negatively the variation of the profit. Only market share, influences the variation in the profit of Islamic banks in terms of competition level. Therefore, the Indonesian government should apply a competition policy to the Islamic banking sector in order to increase their profitability and improve economic growth. For future research, it is recommended to include other Islamic finance institutions like Islamic rural banks and Islamic takaful (Islamic insurance) to analyse these effects in a general way.

Alternatif Pidana dalam Penyelesaian Sengketa Perbankan Syariah di Indonesia

The objective of this text is to understand how conflicts are resolved within the realm of Islamic banking and to devise effective solutions. One prevalent challenge is the occurrence of conflicts or disputes within Islamic banks, which are at times inadequately resolved. The problem statement in this research revolves around criminal activities and dispute resolution within the Islamic banking sector. The research methodology used is qualitative, employing the literature review method or library research. The study findings highlight the significant role of Islamic banking in Indonesia across various domains, especially in the financial activities of communities and the economy, catering to individual needs. Nonetheless, operational difficulties may lead to potential conflicts or disputes. These disputes typically require resolution from both parties involved, namely the bank and the customer, as they share equal roles as stakeholders. Two dispute resolution methods have been identified within Islamic banking: litigation (in court) and non-litigation (outside court). This study identifies the challenges arising in Indonesian Islamic banking and proposes solutions to mitigate them. The two dispute resolution methods suggested by the researchers can be used to overcome challenges in Islamic banking, although each method has its own advantages and disadvantages each approach comes with its own strengths and weaknesses.

Integration of Digital-based Banking Services on Customer Satisfaction (Study of Indonesian Islamic Banks)

The study’s population comprised 18,203 individuals who were registered customers of Bank Syariah Indonesia Labuhanbatu Selatan Regency as of December 2022. The authors decided to use a sample of 100 people because the sampling technique refers to the minimum sample size in PLS-SEM, which is 30-100 sample sizes. A purposive sampling technique was used for the sample withdrawal procedure in order to take into account customers who had saved for about six months. Techniques for gathering data include written data or primary data, interviews, and questionnaires (Google Form). The author used the SmartPLS 4.0 for the data analysis, to demonstrate any partial direct influence between the independent and dependent variables. The study’s findings are as follows: 1) variables related to Islamic banks’ digitalization partially affect banking innovation; 2) variables related to Islamic banks’ digitalization partially affect customer satisfaction; 3) variables related to banking innovation partially affect customer satisfaction; 4) variables related to banking services partially affect banking innovation; 5) variables related to banking service partially affect customer satisfaction; 6) variables related to trust partially affect banking innovation; and 7) variables related to trust partially have no positive and insignificant effect on customer satisfaction. Keywords: Islamic banking digitalization, banking services, trust, banking innovation, customer satisfaction

The Influence of Financing Diversification and Financial Performance on the Risk of Islamic Commercial Banks in Indonesia

This study aims to examine the influence of financing diversification, which includes six financing contracts of Islamic banks in Indonesia and financial performance on credit risk represented by NPF in Islamic commercial banks using regression panel data in 2018-2022. The results of this study indicate that there is an insignificant positive influence on financing diversification and financial performance partially on credit risk in Islamic banking in Indonesia. However, financing diversification and financial performance together have a significant influence on credit risk, which is currently a concern of the Islamic bank financial services authority in Indonesia. The financial performance measurement indicators in this study only focus on ROA, and this indicator may have limitations in measuring the financial performance of Islamic banking.

Sharia Compliance and Profitability in Financial Performance Islamic Banks in Indonesia

This study sought to evaluate the financial performance of Islamic commercial banks in Indonesia from 2018 to 2022, with a specific focus on Sharia compliance and profitability. Secondary data taken from the annual reports of commercial Islamic banks during the specified period were used and a descriptive quantitative approach was adopted. The study population consisted of all 13 Islamic commercial banks registered with the Financial Services Authority in 2022; eight banks were chosen as the research sample. The analysis method used encompasses both Sharia compliance and profitability and is called the Sharia Compliance and Profitability Model. For further analysis, the research findings were divided into four quadrants. The results of the study showed how different Islamic commercial banks in Indonesia performed in terms of Sharia compliance and profitability. It identified banks that showed strong adherence to Sharia principles and high profitability, which could be used as benchmarks by other banks to improve their performance. In more detail, The findings of this research included 3 aspects, namely 1) Identification of Sharia Compliance, this study identified the parameters used to assess Sharia compliance, such as compliance with the principles regulated by the Indonesian Ulema Council (MUI) or equivalent Sharia regulatory institutions. The results of this research revealed banks that consistently complied with Sharia principles in their operations and products. This could include banks that had a financial structure that complied with Islamic law, avoids usury, and adhered to the principles of fairness in transactions. 2) Profitability Assessment. Financial analysis has been carried out to assess the profitability of the investigated banks. This could include profitability ratios such as ROA (Return on Assets) and ROE (Return on Equity), as well as the profit growth from year to year. 3) Factors that influenced the Performance as well as the analysis also included an exploration of factors that contributed to bank performance in terms of Sharia compliance and profitability. This could include internal factors such as risk management and operational efficiency, as well as external factors such as market conditions and regulations. The research has practical implications for commercial banks for enhancing performance and adhering to Islamic values in highly profitable banks that strictly adhere to Sharia principles. By examining the connection between Sharia compliance and profitability, this study added to the understanding of the financial performance of Indonesia's Islamic commercial banks.

Analysis of Fatwa Regarding Sharia Credit Cards and Their Relevance to the Development of Islamic Banking in Indonesia and Bahrain

This research aims to analyze fatwas on Sharia credit cards and their relevance to the development of Islamic banking in Indonesia and Bahrain. This qualitative study uses a text and context approach. The main data used are fatwas from DSN-MUI and the Sharia Supervisory Board of Bank Islam Bahrain regarding Sharia credit cards, supported by books, scientific articles, and reports on the development of Islamic banking. Data were collected through documentation techniques and analyzed using descriptive analysis. This study concludes that Sharia credit cards, as outlined in the fatwas of the National Sharia Council of the Indonesian Ulema Council (DSN-MUI) and the Sharia Supervisory Board of Bank Islam Bahrain (SSB-BIsB), are permissible as transaction tools based on legal principles, contract provisions, wage and service provisions, penalties, and limits in accordance with Sharia principles. Specifically, in Bahrain, fatwas must refer to the standards of the Accounting and Auditing Organization for Islamic Finance Institutions (AAOIFI). Currently, the use of Sharia credit cards in Bahrain is experiencing significant growth, while in Indonesia, public interest in using Sharia credit cards remains relatively low. The findings of this research can serve as policy studies for fatwa institutions and Islamic banking to enhance the growth of Sharia credit cards as a Sharia financing instrument for the public, particularly in Indonesia.

PEMBIAYAAN BAGI HASIL: ANALISIS PENGARUH FAKTOR INTERNAL DAN FAKTOR EKSTERNAL BANK SYARIAH

The rapid development of the Islamic banking industry in Indonesia is evident in the substantial share of profit and loss sharing (PLS), particularly when compared to other nations. However, on regional scale, PLS as a primary product of Islamic banks has yet to assert dominance of disbursed financing. Analysis of internal and external factors that influence PLS of Islamic banks in Indonesia will be the focus of the research. The Error Correction Model method was chosen to determine the effects in the short and long term. Time series analysis was carried out in the time period January 2015 to December 2022. This research found that internal factors, Third-Party Funds had a positive and significant effect on PLS in the short and long term. Then Allowance for Impairment Losses in the short term does not have a significant effect but in the long term it has a negative and significant effect. Interestingly, PLS is not sensitive to CAR and economic growth. This research shows the resilience of Islamic banks in facing the crisis caused by the Covid-19 pandemic. PLS grew higher in the period after the Covid-19 Pandemic compared to before the Covid-19 Pandemic. The implications of these findings encourage Islamic banks to develop products and services, tighten risk management in the long term, and expand the market share of Islamic banks.

Organisational growth and decline in Indonesian Islamic banks

Purpose This study aims to investigate the growth of Indonesian Islamic banks and explores organisational growth determinants from different perspectives, namely, organisational climate, intellectual capital (IC) and organisational service orientation. The study also attempts to develop a model to measure the growth of Islamic banks and uncovers the root causes of the stagnancy in Indonesian Islamic banking. Design/methodology/approach The study used survey questionnaires distributed to Islamic bank managers, who were considered representative experts in the field of Islamic banking. The data collected were analysed using the Statistical Package for Social Sciences (SPSS Version 21.0), and two analyses were performed with different strategies to build the regression model, namely, multiple linear regression and automatic linear regression. Findings The study found that IC significantly affected Islamic banks’ growth in Indonesia; however, organisational climate and service orientation did not predict such growth. Concerning service orientation as a mediating model, climate or IC had no indirect effect on growth. Research limitations/implications This study’s results contribute to fill the gap by analysing the growth of Islamic banks. Hence, the study results will be especially practical and helpful for Islamic bank managers and policymakers to help develop mechanisms for Islamic banks in Indonesia. Originality/value By combining the aspects of organisational climate, IC and service orientation from earlier studies and categorising them by organisational growth, together with a comprehensive literature review, the study proposes a model specific to Islamic banks. It also offers new insight and discussion for determining organisational growth in Indonesian Islamic banks.

Effect of architecture and efficiency of mobile banking application on the intention to continue using Islamic bank: does data security matter?

PurposeThis study aims to examine the effect of application architecture and application efficiency on the intention to continue using Islamic bank with data security as a moderator. The investigation was situated within the framework of a hacker attack that compromised the security of customer data at one of Indonesia’s largest Islamic bank.Design/methodology/approachA survey questionnaire method was used, and the sample population comprised users of Islamic bank in Indonesia. The respondents were then selected purposively with the criteria of individuals who were using mobile banking services. Furthermore, data collection in this study was carried out by distributing questionnaires online. To validate the questionnaire, consultation and validation were conducted by engaging four experts and conducting a pilot study. Hypothesis testing was performed using the structural equation modeling method based on partial least squares.FindingsThe results of the partial least square structural model assessment showed that application efficiency and data security positively influenced the intention to continue using Islamic bank, while application architecture had no effect. Furthermore, data security could not moderate the relationship between application architecture and efficiency toward the intention to continue using Islamic bank.Practical implicationsThe results of this study suggested that Islamic banking practitioners must prioritize the enhancement of digital banking services, with a specific focus on improving application efficiency and ensuring robust data security. These two dimensions were critical determinants influencing the intention to continue using Islamic bank.Originality/valueThis study addressed the issue of data security as a moderator, particularly in the context of hacker attacks targeting a major Islamic bank in Indonesia. Furthermore, this current report expounded on the study conducted by Mir et al. (2022) by introducing novel dimensions to the e-service quality of internet banking.