Islamic Banking Operations Research Articles

ARTIFICIAL INTELLIGENCE IMPLICATIONS IN ISLAMIC BANKS: POTENTIAL AND CHALLENGES

As new digitalization strategies storm the banking industry, banks which are behind the technological curve may struggle to keep pace. This is a well-known challenge in the Islamic banking sector in particular; however, this research shows that little is being done to achieve unified digitalization in operations. Artificial Intelligence (AI) is a disruptive force in the financial sector, promising increased financial inclusion, economic development, and a excess of efficient, transparent, Shariah-compliant financial solutions due to its integration of technology with Islam’s profound ethical principles. The objective of this paper is to study the potential and challenges of AI implications in Islamic Banks. This is a qualitative study using focus group interviews with five Islamic Banking experts consists of Shariah Committee Member, academic experts and Islamic banking executive from different banks in Malaysia. SC members from different Islamic banks. Following the interviews, a thematic analysis of the transcribed data was conducted using computer-assisted qualitative data analysis software. The participants were generally receptive towards the utilization of AI tools in the Islamic banks which give a significant impact of the Islamic banking landscape. The participants recognize the potential of AI for improving the efficiency and effectiveness of the Islamic banking operations. However, they raised some concerns about the challenges that need to be addressed such as replacing of manpower with AI in some area in Islamic banks. The novelty of this research provides a novel discussion of potential and challenges of AI implications in Islamic banks and at the same time add to the Islamic banking literature in this area. The size of the focus group was limited to five participants to optimize group size and composition to allow adequate participation by each group member. Further sampling from more SC members and experts may elicit additional findings. The first-hand views from the focus group interviews provides valuable input for potential and challenges of adopting AI in the Islamic banking operations.

Islamic Finance and Economic Growth: Empirical Evidence from Panel ARDL Approach

Abstract This paper applied the pooled Mean Group (PMG) /ARDL approach to examine the effect of Islamic finance on economic growth of Brunei, Indonesia, Jordan, Kuwait, Malaysia, Nigeria, Oman, Pakistan, Saudi Arabia, Sudan, Turkey and United Arab Emirates. Using variables such as gross domestic product growth rate as the dependent variable, Total Assets of Islamic Banks, Total Revenue of Islamic Banks, Total Islamic Banks financing and Sukuk Holdings as the independent variables for the period 2014Q1 – 2022Q4. Panel unit root test was carried out to ascertain that no variable was integrated of order 2. To achieve these four different types of panel unit root tests Im, Pesaran and Shin, ADF-Fisher, PP-Fisher and Levin Lin Chu tests were applied. The estimated pooled Mean Group (PMG) model established the existence a negative but significant long-run relationship between Islamic finance and economic growth of the selected countries with the exception of total assets of Islamic banks which shows a positive and statistically significant relationship with economic growth. The validity of this finding was supported by the error correction coefficient which was negative and statistically significant. Consequently, to achieve growth in GDP the study recommends that policymakers should focus on implementing policies that promote a conducive environment for Islamic banking activities and stimulate demand for Sharia-compliant financing. Another key policy recommendation is to develop a supportive regulatory framework that accommodates Islamic finance principles and facilitates the growth of Islamic banking operations. JEL classification numbers: F43, C33. Keywords: Islamic Finance, Economic Growth, Sukuk, Panel ARDL.

Internal Shariah audit change: an identification of specific Islamic legal maxim in Islamic banking institution

Purpose This paper aims to provide insight on internal Shariah audit change process in Islamic banking institution using sociology of translationin and the identification of specific Islamic legal maxim (ILM). Design/methodology/approach This paper gathered findings using qualitative approach where a single case study was selected. The study began with a preliminary study to assist the selection of the case study and later two phases of interviews done at the institution selected as the case study. Findings This paper has provided insights into the internal Shariah audit practices change using sociology of translation that incorporated ILM as the basis to strengthen the Islamic banking operations by achieving maqasid al-Shariah (MS). The findings of this paper provide distinguished insight on internal Shariah audit change process and ILM. The significance of this study is that a new contribution through exploring the viewpoints of the perception that satisfying the minimum legal requirements of Shariah compliance may not be sufficient for proper Shariah audit in IBIs. Therefore, the existence of ILM within a change process serves as a basis for best practices to be able to achieve MS through the means (wasa’il) used in realising IBIs’ objectives. Originality/value The application of ILM to internal Shariah audit change process that would guide Muslim auditors to be in line with Islamic principles. This paper focuses on the application of ILM to the Shariah audit practices changes as ILM embodied ethical value to the general concept of maslahah (well-being) under MS in the period of post-COVID-19.

Islamic Banks Stability in Indonesia: Assesing the Role of Islamicity Performance Amidst the Pandemic Challenges

Research Originality: Islamicity performance reflects adherence to Sharia principles, which are fundamental to Islamic banking operations. Research that emphasizes the contribution of Islamicity performance to the stability of Islamic bank requires additional studies.Research Objectives: This research examines the influence of banks’ internal factors, Islamicity performance, and macroeconomic factors on the Islamic bank stability amidst the pandemic challenges using financial intermediation theory.Research Methods:A random effects test was performed on a balanced panel data covering the period of 2017.1-2023.3 on 10 Islamic banks continuously publishing quarterly financial reports.Empirical Results: Credit risk and eficiency affect stability. Higher expenses enhance stability during pandemic. Reserves for uncollectible debt reduce stability. Islamicity performance in profit-sharing financing may reduce stability. Economic growth and inflation negatively affect stability pre-pandemic. Interest rate and dummy variables have positive effects.Implications: These findings imply the significance of preemptive risk management, cost-effective operations, prudent reserves allocation, and regulatory compliance to enhance stability in Islamic bank across varying economic circumstances.JEL Classification: E4, G21, B22How to Cite:Amaroh, S., Masykuroh, E., Husnurrosyidah., & Ali, M., (2024). Islamic Banks Stability in Indonesia: Assesing the Role of Islamicity Performance Amidst the Pandemic Challenges. Etikonomi, 23(2), 317 – 332. https://doi.org/10.15408/etk.v23i2.37269.

The Legal Position of the Indonesian Ulema Council in Applying the Principles of Islamic Law in Islamic Banking Operations in Indonesia

National economic development through the establishment of Islamic Banks is an implementation of Article 29 of the 1945 Constitution of the Republic of Indonesia. The presence of Islamic Banking in the national economy is a strategic legal policy of the government because its operations are based on the principles of Islamic law, namely principles derived from the Qur'an, Hadith, Ijma', and Qiyas. However, in its application, these principles of Islamic law are manifested in the form of fatwas issued by the National Sharia Council-Indonesian Ulema Council (DSN-MUI) as a source of positive law for Islamic banking. Therefore, this study raises legal issues related to the legal position of the Indonesian Ulema Council in the application of sharia principles to Islamic Banking operations in Indonesia. This study aims to analyze and determine the legal position of the Indonesian Ulema Council in the application of sharia principles to Islamic Banking in Indonesia. The research method used is normative research, which provides answers to the problems raised with the perspective of what should be done. The results of the study indicate that the DSN-MUI fatwa has a crucial role as a positive legal basis in the operation of Islamic Banking in Indonesia, although formally it is not a statutory regulation. The implications of this study indicate the importance of recognizing and strengthening the role of the DSN-MUI in the national legal system to ensure compliance of Islamic Banking operations with applicable sharia principles.

Internal and External Factors on Profitability of Islamic Banks in Indonesia Mediated by Operating Expenses Operating Income (Period 2013 to 2023)

Lucrativeness is a vital element for evaluating Islamic banks' monetary achievement. It's critical to grasp the determinants that influence Indonesian Islamic banks' lucrativeness. The objective of this examination is to explore the factors—such as problematic financing, financing to store ratio, currency rates, price rises, and operational proceeds as an intermediary variable—that impact the productivity of Islamic banks in Indonesia. This research intends to provide choice makers in the Islamic fiscal industry a more comprehensive discernment of the budgetary operation of Islamic banks by scrutinizing these guidelines. This research methodology uses a panel data approach using secondary data from Islamic banks in Indonesia. Through panel data analysis, this study examines the effect of these variables on the profitability of Islamic banks. The conclusions showed that, in Sub-structural I, Financing to Deposit Proportion (FDR) favorably affects the productivity (ROA) of Indonesian Islamic banks, while Non-Performing Financing (NPF), Currency Ratios, and Rising Prices have no consequence on operational expenses operational proceeds (BOPO). As indicated by sub-structural II, profitability is impacted by inside factors (NPF and BOPO), outer variables (expansion and cash rates) have no significant effect on productivity, and financing to store proportion (FDR) has no impact on productivity. In this examination, the BOPO fills in as a mediating variable that just intercedes the effect of the Financing to Deposit Ratio on Lucrativeness. Concerning the other autonomous factors, it has no bearing. Other than featuring the significance of hazard relief and operational effectiveness in accomplishing positive monetary outcomes, this exploration illuminates the variables influencing the productivity of Islamic banks in Indonesia.

Banking efficiency, ownership types, and operations: A quasi-natural experiment of conventional and Islamic banks

This study examines the banking efficiency of different ownership types and operations in an emerging market in South Asia. It further explores the moderating effect of Islamic banking operations on such relationships. The effects of banking regulatory developments on banking efficiency are also examined through a quasi-natural experiment approach. Using 533 banking unit observations of banks for FY 2002/2003 to 2017/2018 period, and applying the data envelopment analysis (DEA) method for banking efficiency and Tobit regression, the findings document that the banking efficiency of the state-owned conventional banks outperforms privately-owned domestic banks, as well as conventional domestically owned banks (state-owned and privately-owned banks) outperforms the foreign-owned banks. Again, the banking efficiency outperformance of the conventional banking operation over the Islamic banking operation is found. However, the outperformance of conventional state-owned banks diminishes with the moderation of Islamic banking operations. Additionally, the quasi-natural experiment with difference-in-difference (DID) regression result reveals that the banking efficiency of Islamic banks and conventional state-owned banks has improved during the post-regulatory period and reduced the efficiency gap between them (in favor of conventional banks). However, the banking efficiency of conventional state-owned banks offering Islamic banking services has diminished in the post-regulatory period. These findings remain robust during the global financial crisis (GFC) and non-GFC periods. Overall, the results add a new dimension to the banking efficiency and regulatory development research for the policymakers and regulators in the financial services sector.

Shari’ah Foundation of Islamic Banking

Islam prescribes a complete code of conduct for human life including economic activities. The prescribed Islamic code of conduct generally refers to Shari’ah, on which Islamic banking was founded. The most important characteristic of Islamic banking is to maintain its products and operations according to the principles of Shari’ah, which is based on the Holy Qur’an, Hadith, Ijma, Qiyas, and Ijtihad. Islamic banking has rapidly been growing in the modern economic world as an alternative to conventional banking. It is expected that Islamic banking operations will not only comply with the Shari’ah but also contribute towards achieving the Maqasid-al-Shari’ah (objectives of Shari’ah), which is the ultimate welfare of the Muslim Ummah and the human being. The findings of several studies showed that Shari’ah compliance is the single most important factor for choosing Islamic banking. Unfortunately, many recent studies revealed that many Islamic banks are violating their obligation of Shari’ah compliance. Hence, the paper aims at understanding the Shari’ah foundation of Islamic banking to examine that the modes of Islamic banking are based on the principles of Shari’ah. It also incorporates the major components of Shari’ah and its concept of economic tools such as ownership, wealth, money, capital, trust, and accountability to have a comprehensive idea about the Shari’ah foundation of Islamic banking. The methodology used in this conceptual study is a critical analysis of the literature survey. The literature on the concept of Shari’ah basis of Islamic banking is read to understand the basic components of Shari’ah and its principles to govern economic practices to examine its application in the Islamic banking industry and identify the Shari’ah foundation of the modes and contracts used by the modern Islamic banking industry.

Objectives of Islamic Marriage: A Study of the Primary and Subsidiary Objectives

Holy Qur’an, Hadith, Ijma, Qiyas, and Ijtihad. Islamic banking has rapidly been growing in the modern economic world as an alternative to conventional banking. It is expected that Islamic banking operations will not only comply with the Shari’ah but also contribute towards achieving the Maqasid-al-Shari’ah (objectives of Shari’ah), which is the ultimate welfare of the Muslim Ummah and the human being. The findings of several studies showed that Shari’ah compliance is the single most important factor for choosing Islamic banking. Unfortunately, many recent studies revealed that many Islamic banks are violating their obligation of Shari’ah compliance. Hence, the paper aims at understanding the Shari’ah foundation of Islamic banking to examine that the modes of Islamic banking are based on the principles of Shari’ah. It also incorporates the major components of Shari’ah and its concept of economic tools such as ownership, wealth, money, capital, trust, and accountability to have a comprehensive idea about the Shari’ah foundation of Islamic banking. The methodology used in this conceptual study is a critical analysis of the literature survey. The literature on the concept of Shari’ah basis of Islamic banking is read to understand the basic components of Shari’ah and its principles to govern economic practices to examine its application in the Islamic banking industry and identify the Shari’ah foundation of the modes and contracts used by the modern Islamic banking industry.

Regulatory Frameworks and Governance in Islamic Banking: A Bibliometric Review of Compliance Standards

Over the past few decades, the global discourse on environmental sustainability and climate change has catalyzed a profound transformation in economic paradigms, giving rise to the concept of the green economy. This paradigm emphasizes the integration of environmental considerations into economic activities to foster sustainable development and mitigate environmental degradation. In the context of Islamic banking, which operates under the principles of Sharia, there is a growing recognition of the importance of aligning financial practices with ethical and social values, including environmental stewardship. This bibliometric review explores the regulatory frameworks and governance structures in Islamic banking with a focus on compliance standards related to environmental sustainability. Through a systematic analysis of scholarly literature, this study aims to shed light on current trends, key areas of focus, and potential areas for improvement in ensuring environmental sustainability within Islamic banking operations.

Talent Management and its Effect on Employee Engagement: A Field Study on Islamic Banks Operating in the Capital Municipality of Sana'a, Yemen

This study aimed to identify the impact of talent management (TM) on employee engagement (EE) in Islamic banks operating in the Capital Municipality of Sana’a, Yemen. The study adopted the descriptive analytical method and developed a questionnaire as the study instrument. The study population consisted of 1024 workers in Islamic banks in Sana’a, and the sample size was 280 individuals selected by using disproportionate stratified random sampling. Out of 280 distributed questionnaires, 276 were valid for statistical analysis via SPSS (V. 25). The results revealed that TM is practiced at a high level in the surveyed banks through all its dimensions. EE is also practiced at a high level in the surveyed banks, with vigor and dedication being higher than absorption. Results also indicated that TM has a significant positive impact on EE in the surveyed Islamic banks, except for talent retention, which has no significant effect. Based on these findings, it was recommended that Islamic banks should maintain and enhance the high level of practice of EE among their employees, focusing on the factors that foster EE. Furthermore, the aforementioned banks should pay more attention to TM practices and provide the necessary means to attract, develop, and retain talented workers.

Islamic Bank Performance Assessment Using SATF Value

This study aims to evaluate the performance of Islamic banks based on the shidiq, amanah, tabligh, and fathona (SATF value) approach. The type of research is descriptive quantitative using secondary data. The research population is all Islamic Commercial Banks (ICB) operating in Indonesia for 2018-2022. The sampling technique uses saturated samples. The data combines ICB annual financial reports issued by the Financial Services Authority (FSA) and literature studies. The data analysis technique uses simple additive weighting (SAW). The research results show that Shidiq's performance shows high public confidence in Islamic bank savings products. Amanah's performance shows that the distribution of financing and carrying out responsibilities to bring benefits still need to be higher. Tabligh's performance shows that the level of Islamic compliance carried out by banking operations is Islamic. Fathona's performance shows that Islamic banking still needs to be optimal in increasing human resources (HR) capability or quality. Overall, the results of evaluating the performance of Islamic banking in Indonesia using the SATF value model during 2018-2022 are entirely satisfactory, with the SATF performance value increasing from year to year. The results of this research can be a reference for future research and provide valuable guidance for maintaining and improving Islamic banking performance while actively correcting any identified weaknesses or deficiencies.

DISPLACED COMMERCIAL RISK AND ITS EFFECT ON ISLAMIC BANK CUSTOMER LOYALTY: AN ANALYSIS OF SUPPORTING FACTORS

The purpose of this study is to determine what factors encourage the emergence of Displaced Commercial Risk in Islamic banks and their effect on the loyalty of Islamic bank customers. Displaced Commercial Risk is a risk that occurs due to changes in the level of returns provided by banks to customers, resulting in indications that customers move some of their funds from Islamic banks to conventional banks. This study uses multiple linear regression analysis, by conducting reliability and validity tests, classical assumption tests and hypothesis testing. The sample of this research is Islamic Bank customers who have met the sample determination criteria of 150 respondents. The results showed that there are three factors driving the emergence of Displaced Commercial Risk in Islamic banks, namely the Return Rate, Islamic Bank Operations and Return Expectations. Of the three factors, the Expectation of Yield factor does not have a significant effect on the loyalty of Islamic Bank customers.

Optimalisasi Manajemen Sumber Daya Data Untuk Mengatasi Tantangan Digitalisasi Dalam Operasional Bank Syariah

This research focuses on the characteristics of digital banking that are relevant in overcoming the challenges of digital money services from non-bank applications in Islamic banking operations in Indonesia, especially in the context of data resource management. Key characteristics highlighted include predictability, interoperability, speed, security and mobility. The research results show that data resource management is core in optimizing sharia bank operations to compete with non-bank applications that increasingly dominate. Islamic banks must ensure data certainty and security, and utilize data efficiently to meet increasingly polarized customer needs. In facing competition from non-bank applications, Islamic banks must continue to innovate, understand consumers, and optimize data resource management to remain relevant in the digital banking era.

Islamic Corporate Social Responsibility Disclosure, Profitability, and Visibility of Sharia Commercials Bank in Indonesia

The purpose of this study is to analyze the effect of profitability and visibility on Islamic Corporate Social Responsibility Disclosure (ICSRD) of Islamic Commercial Banks in Indonesia for the period 2020 – 2022. This research is a quantitative study using secondary data from the Islamic Commercial Bank's Annual Reports and Sustainability Reports. The effects are examined based on content analysis of 9 Islamic Commercial Banks in Indonesia using a purposive sampling technique. The results showed that profitability and visibility simultaneously had a significant effect on the ICSRD of Islamic Commercial Banks in Indonesia for the period 2020 – 2022. However, partially the profitability did not affect ICSRD. Meanwhile, the visibility has a significant effect on ICSRD partially. The results of this study are expected to provide a reference for Islamic Commercial Banks policymakers to always improve the ICSR to maintain customer confidence in the operations of Islamic Commercial Banks in Indonesia.

EVALUATION OF SHARI'AH GOVERNANCE PRACTICES IN SAUDI ARABIAN BANKS

Islamic banking is witnessing a significant increase in worldwide demand for its products alongside the increased interest in Sharīʿah governance, which is an essential means of ensuring that the products and activities of Islamic banking institutions fully comply with Sharīʿah (Islamic law), meet customer needs, and increase their competitiveness in both local and international markets. The aim of this paper is to evaluate Sharīʿah governance practices in Saudi Arabian banks and also ‎examine the level of adherence to Sharīʿah governance principles, institutional ‎frameworks, regulatory standards, and procedures within Saudi banks. This paper ‎employs a descriptive analysis approach, while the data were collected through a ‎questionnaire survey from 95 members of Sharīʿah advisory boards, Sharīʿah groups, and Sharīʿah governance committees ‎in 11 banks operating in Saudi Arabia. A regression analysis was performed to estimate relationships between the level of compliance and commitment to Sharīʿah governance in Saudi banks as a dependent variable, and the implementation of Sharīʿah governance, its dimensions, and the availability of implementing procedures of Sharīʿah governance as independent variables. The findings confirm the existence of variations between banks at ‎the level of implementing Sharīʿah governance principles and standards. The dimensions ‎of Sharīʿah governance received varying levels of attention in the banks, with ‎organizational structure ranking first, followed by the dimensions of responsibility and ‎disclosure, and finally, control, auditing, and accountability. The study reveals ‎disparities in the implementation levels of Sharīʿah governance between banks with full-fledged Sharīʿah compliance and conventional banks that offer Islamic windows. ‎Additionally, the study indicates differences in the adequacy of implementing ‎procedures for Sharīʿahgovernance principles and standards in both types of Saudi banks, attributed ‎to variations in bank size, product type, and organizational structure. The results of ‎the regression analysis demonstrate that the ‎implementation of Sharīʿah governance dimensions and the availability of implementing ‎procedures have a statistically positive effect on the level of commitment to Islamic banking and Sharīʿah governance. The paper suggests a necessity for training personnel in Islamic ‎banking, activating the role of Sharīʿah compliance units, and developing the ‎Sharīʿah governance framework in Islamic banking operations in Saudi Arabia.

The Impact of Management Information Systems on Strategic Success: A Field Study in Islamic Banks Operating in Aden, Yemen

The study aimed to identify the impact of management information systems in its four dimensions (human resources, material resources, software, information security) on the strategic success in its three dimensions (survival, growth, adaptation) in Yemeni Islamic banks operating in the city of Aden (Tadhamon International Bank, Saba Islamic Bank, CAC Islamic Bank). The study adopted the descriptive analytical approach, and the study population consisted of the administrative leaders working in those banks, and their number was (56). The study used the questionnaire as a tool (f)or data collection, and it employed the statistical program (SPSS) for data analysis. The study reached a number of conclusions, the most important of which are: In general, there is an impact of management information systems on the strategic success, and there is an impact for each of the four dimensions of management information systems (human resources, material resources, software, information security) on the strategic success of the banks in the study population. The level of management information systems in banks provides the study population with a very high level on the variable itself and at the level of dimensions such as (physical resources, software, information security). Further, there is an impact of management information systems on strategic system at a high-level of a dimension such as (human resources). There is also an impact with regard to dimensions such as (growth, adaptation) and a very high level of impact on a dimension such as (survival). The study recommended that banks should make use of strengths, addressing points of weaknesses, seizing opportunities, and overcoming threats in order to achieve their objectives. It also suggested conducting another scientific study on the impact of management information systems in strategic control in other dimensions of management information systems and this can be determined according to the specialized functions of banks.

Perceptions of Islamic Banking among Post Millennials: A Study on Muslim Students

This study aimed to understand the perception of Islamic banking among post millennials Muslim students and explore their expectations towards Islamic Shariah compliant banking. The study uses qualitative method to understand respondents’ subjective views. Semi-structured interviews are used among the Muslim students studying at public and private universities in Malaysia. Twelve students were selected using purposive sampling. The analysis revealed that religious motives, efficient services, and convenience in terms of online banking and ATM services are factors in bank selection. The study found that the students’ perceptions of their understanding of Islamic banking are not sufficient, and there is a gap in the understanding of the mechanism of Islamic banking operations. Most of the existing literature is on the customer satisfaction, customer behaviour and service quality. However, there are little research on the perceptions of Islamic banking among the students who are post millennials. This study focus on the new generation’s perception of Islamic banking and attempts to fill this gap. The findings of the present study can be used as a reference in future studies in the area of perceptions among students or post millennials.

LEVERAGING BLOCKCHAIN-BASED SMART CONTRACT IN ISLAMIC FINANCIAL INSTITUTIONS: ISSUE AND RELEVANT SOLUTION

A blockchain-based smart contract is a computer script, stored in the blockchain network and enforced automatically based on predetermined terms, decentralised verification as well as fully accessible real-time records to all blockchain users. Smart contract innovation, with a high level of transparency and a lower risk of operational errors, offers a novel approach for more effectively implementing Shariah contracts in Islamic financial institutions. However, the immutable smart contract principle, which disallows the amendment or deletion of the code deployed in the blockchain, appears incompatible with the iḥsān criterion implemented in Islamic financial institutions’ product offerings that allow operations and terms adjustment under certain conditions, including payment rescheduling and contract restructuring facilities in financing products. This study aims to look into the concept of blockchain-based smart contracts, as well as issue related to immutable smart contract and viable solutions that align with Shariah and Islamic banking operations. The study utilised the library research to achieve the objective by referring to related literature. The qualitative data were then descriptively analysed using the conceptual content analysis method. The study’s results found that, in order to comply with the characteristics of iḥsān to implement Shariah contracts using blockchain-based smart contract technology, the programmer should first write flexible code rather than fixed code, and the upgradable proxy contract should be well applied in the creation of the smart contract code.

SIMULASI MANAJEMEN RISIKO REPUTASI BANK SYARIAH

Islamic Bank operations meet various risks and one of them is reputation risk. The reputation of Islamic banks can be profitable and harmful. Therefore, Islamic Banks need to mitigate the risks so that this reputation can have a beneficial impact on Islamic banks. This article discusses the meaning of Islamic bank reputation and what factors influence the reputation risk. The reputation of Islamic banks is a collection of images from stakeholders towards Islamic banks. This reputation does not stand alone and is influenced by other things such as liquidity. The reputation risk of Islamic banks is influenced by 5 things, namely the owner's reputation, business ethics, products and business processes, negative publicity, and customer complaints. In order to mitigate this risk, it is necessary to apply an assessment by implementing risk management.