Islamic Bank Financing Research Articles

The role of Sharia governance in minimizing credit risk in Islamic banking: a systematic literature review

Purpose The purpose of this paper is to engage in a systematic examination of previous scholarship on the relationship between Sharia governance (SG), which is represented by the Sharia Supervisory Board (SSB), and the Internal Sharia Review (ISR), to determine whether the ISR can minimize financing risk in Islamic banking. Design/methodology/approach The literature search consisted of two steps: a randomized and systematic literature review. The methodology adopted in this article is a systematic literature review. Findings To reduce the risk of financing in Islamic banking, SG must be implemented optimally by making rules regarding the role of the SSB in supervising customer financing. In addition, it is a necessary to establish an entity that assists the SSB in the implementation of SG, namely, the ISR section, but there is still very little research on the role of the SSB and ISR in minimizing financing risk. Practical implications Establishing an ISR to assist the SSB in carrying out its duties has direct practical implications for Islamic banking: minimizing financing risks and compliance with Islamic Sharia principles. In addition, new rules regarding the role of SSBs and the ISR in reducing credit risk include monitoring customers to ensure that they fulfill their financing commitments on time. This new form of regulation and review can be used as a reference by the Otoritas Jasa Keuangan or Finance Service Authority to create new policies or regulations regarding SG, especially in Indonesia. Originality/value Subsequent research may introduce other more relevant variables, such as empirically testing the competence, independence or integrity of SSB and the ISR team as it attempts to minimize the risk of financing in Islamic banks. In addition, further research is expected to examine whether the SSB or the ISR team has a positive or negative influence on the risk of financing Islamic banks with secondary data.

Nonlinear effect of Islamic financing on economic stability: A Case of equity and debt financing

The main purpose of this study is to differentiate between the effects of two major categories of financing of Islamic banks on the economic stability of the selected countries. This study determines the nonlinear effect of equity-based and debt-based financing of Islamic banks to assess how the stability of the economy can be achieved. This study acquires the data on Islamic banking product-wise financing at a national level from the Islamic Financial Service Board (IFSB), and the data on industrial production index is selected from International Financial Statistics for selected countries. The sample size comprises of all the countries included in the IFSB. The data ranges from 2014Q1 to 2019Q4. The economic stability is estimated using the GARCH volatility approach, and the nonlinear ARDL model is used to determine the causal effect of Islamic banking product wise financing. This study clarifies the empirical relationship between Islamic banking equity-based financing and debt-based financing and whether macroeconomic stability is linear or quadratic in terms of the marginal effect of financing, which helps policymakers to constitute strategies for expanding the size of Islamic banking financing. The results identified the inverted U-shaped effect of equity-based financing types on output instability. At the same time, both financing types are not causing price instability. The outcomes are instruments for the central bank to optimize the Islamic banking financing structure to achieve the goal of product-wise financing of economic stability.

KONTRIBUSI ISLAMIC BANKING FINANCING AND VARIABLES MACRO ECONOMIC TERHADAP TINGKAT KEMISKINAN DI INDONESIA

Poverty is a global issue faced by many countries in the world, including Indonesia. The purpose of this study is to examine the level of poverty in Indonesia by measuring the financing of Islamic banking, education, health, TPAK and inflation against the level of poverty in Indonesia. The data source used is panel data obtained from the Central Bureau of Statistics (BPS) for the 2010-2020 period. Data analysis used panel data regression with Common Effect Model (CEM), Fixed Effect Model (FEM), and Random Effect Model (REM) Approach processed with E-Views 10. The results of this study indicate that the estimated model chosen in this study is Fixed The Effect Model shows the results of the Islamic Banking Financing, RLS, UHH, TPAK and Inflation variables that have a significant effect in a negative direction on the level of poverty for the RLS variable that has a simultaneous effect on the mission level while UHH has a significant effect in a negative direction. This means that if there are independent variables simultaneously, then the level of poverty in Indonesia is increasingly leading to change. Whereas in the simultaneous test the prob value of the F-Statistic is 0.000000 <0.05, which means that the five independent variables simultaneously influence the level of poverty in Indonesia. And the Adjusted R-Square value is 0.987540 which means that 90% of the Islamic Banking Financing, RLS, UHH, TPAK and Inflation variables in this study are able to explain the poverty rate variable in Indonesia. While the remaining 10% is explained by other variables outside the model.

The Obligation of The State to Realize Sharia-Compliant Certainty in Islamic Banking Financing

Introduction: Islamic banking is growing significantly and rapidly. The state needs its presence not only related to providing the right to freedom of religion but also ensuring that its implementation is following the provisions of sharia. Islamic banks have received a lot of criticism due to the existence of prohibited elements specifically in financing. Therefore, a supervision system for sharia compliance is needed.Purposes of the Research: This paper analyzes the basis and form of state obligations and their manifestation in ensuring compliance with Sharia principles in Islamic banking financing contracts in Indonesia. Because the State Financial Services Authority as the party with the authority in supervision has not reached the conformity of Sharia principles in the agreement as a private aspect.Methods of the Research: The problem analysis methodology involves legal research with a philosophical approach. The Statute Approach is conducted by reviewing applicable legal regulations, while the Analytical Approach involves analyzing legal principles and understanding through the examination of legal materials using techniques such as grammatical, teleological, and systematic interpretation.Results of the Research: The state is responsible for ensuring Sharia compliance in Islamic banking financing stems from the basic principles of Pancasila and the Constitution, as reflected in various laws, regulations, and fatwas of the National Sharia Council. These regulations serve as guidelines for sharia-compliant financing. However, legal certainty is needed in supervision and sanctions in implementing Sharia compliance.

Market Concentration, Bank Characteristics, Macroeconomic Conditions, and Indonesian Islamic Bank Financing

As the latest player in the banking market in Indonesia, Islamic banks are not as experienced as their counterpart conventional banks. In addition, the types of Islamic bank financing (loans) are different from conventional bank loans. Our work investigates the determinants of Islamic bank financing in Indonesia. Our concern variables are market concentration, bank fundamentals, and macroeconomic conditions, including Covid-19. This study examines all Islamic banks in Indonesia from 2015 to 2020 using quarterly data. Our data set is 724 observations with unbalanced panel data. We employ the dynamic panel data using the two-step system GMM that is more robust than two-step difference GMM. Market concentration encourages financing. Profitability, bank size, and financing loss provision also enhance financing. However, a high degree of risk aversion and inefficiency reduces financing. Furthermore, Islamic bank financing also depends on macroeconomic conditions. Economic upturns strengthen financing. Strong bank fundamentals, particularly bank size, are the key to success for Islamic bank financing. The results draw an important practical implication. Large Islamic bank is a necessary condition to compete with a conventional bank. Accordingly, the spin off policy of Islamic bank windows to full-fledged Islamic bank should be implemented immediately.

The existence of Murabahah in Bank Aceh Syariah based on the Fatwa of Majelis Ulama Indonesia No 111 /DSN-MUI/IX/2017

Financing in Islamic banks today is dominated by Murabahah contracts. The purpose of existing research is to explain how the existence of Murabahah financing in Islamic banking serves the community and assess whether the contracts executed comply with the Fatwa of Majelis Ulama Indonesia. This research is a library-research focused on examining and discussing modern and classical literature. Data collection is conducted through documentation methods from various sources including national and international journals, as well as books. The data is then analyzed using content analysis, which includes descriptive analysis and scientific analysis of premium messages. The findings of this research indicate that Murabahah financing is predominantly conducted by Islamic banks for community financing. In the application of Murabahah financing, Islamic banks act as fund providers rather than sellers. The Murabahah contracts in classical fiqh have undergone changes, which have been criticized by various segments of society. It is noted that there are contemporary issues arising in Murabahah financing transactions that do not align with Sharia principles and the Fatwa of Majelis Ulama Indonesia.

Sharia Board Characteristics, Macroeconomic Factors, and Non-performing Financing of Indonesian Islamic banks

This study examines the impact of Islamic board characteristics (SB) and macroeconomic factors on the Non-performing financing (NPF) of Islamic commercial banks (ICB). The sample of this study consisted of 14 ICBs in Indonesia from 2010 to 2021. In this study, data estimation used a one-step GMM System model. SB features such as SB Size and SB Woman were found to have a detrimental impact on NPF. GDP per capita, for example, negatively affects NPF, while inflation has a positive impact. However, this study could not show the impact of SB characteristics such as expertise and proximity of SB to NPF. The study also found that macroeconomic factors such as annual open unemployment and interest rates showed an insignificant negative influence on NFP. The findings of this study help regulators, investors, and management of Islamic banks better understand the impact of SB characteristics and macroeconomic factors on Non-performing financing (NPF) of Islamic banks, especially in the context of ICB in Indonesia. In addition, it is expected to inspire similar research in the future.

Resolving Disputes Regarding Trust Financing in Islamic Rural Banks, West Java

One form of Islamic banking financing is mudarabah, which is a profit and loss sharing contract between an Islamic bank and a mudarib. This type of contract requires a mutually open attitude between both parties to the advantages and disadvantages of the project undertaken. Therefore, banks should implement a system of monitoring and assessment of project criteria well to avoid risks that may cause bank losses as sahib al-mal. This research uses a mixed method of research, with data collection methods as interviews, questionnaire, observation and document analysis. Which is then analyzed qualitatively by analysis from interviews and observations. For quantitative analysis, factor analysis, regression and Analysis of Variance (ANOVA) are conducted. The results of this research are the criteria of projects that need to be supervised by Islamic banking, which are Project Profiles, Payment Guarantee, Project Management, and Prospect project. If the assessment of project criteria is tightened and implemented correctly, mudarabah financing issues can be reduced and resolved.

Influence of Internal Factors and External Factors on Non Performing Financing in Islamic Commercial Banks

This study aims to see the effect of the variables Return on Assets (ROA), Capital Adequacy Ratio (CAR), Operating Costs and Operating Income (OCOI), Financing to Deposit Ratio (FDR), inflation and Gross Domestic Product (GDP) on Non-Performing Financing (NPF) for Islamic commercial banks in Indonesia for the 2018-2022 period. This type of research uses quantitative research methods. The analytical tool used is multiple linear regression analysis using E-views version 10 software. The sample in this study is Islamic Commercial Banks in Indonesia. The results showed that simultaneously the variables ROA, CAR, OCOI and FDR had a significant effect on Non-Performing Financing (NPF), while simultaneously, the variables Inflation and GDP did not have a significant effect on Non-Performing Financing (NPF). Partially CAR, OCOI, and FDR have a significant effect on Non-Performing Financing (NPF), whereas ROA, Inflation and GDP have no effect on Non-Performing Financing (NPF). Internal factor variables have an effect of 88.2% on Non-Performing Financing (NPF), while 11.8% are influenced by other variables not examined. External factor variables have an effect of 3.1% on Non-Performing Financing (NPF), while 96.9% are influenced by other variables not examined.

Macroeconomic Impact on Non-Performing Financing in Islamic Banking in 2011-2021

Macroeconomic Impact on Non-Performing Financing in Islamic Banking in 2011-2021

Examining the impact of zakah and Islamic finance on national economic growth

Purpose – This study aims to analyze the effect of Islamic financial instruments, including social funds zakah, infak, and sadaqah (ZIS), Islamic financing, Sharia stocks, and corporate sukuk, on economic growth.Methodology – This study uses monthly data from 2013 to 2022 to examine the relationship between ZIS distribution, Islamic bank financing, Islamic stock capitalization, corporate sukuk issuance, and economic growth proxied by the production industry index (IPI). The Vector Error Correction Model (VECM) was utilized.Findings – According to the short-term estimation results, sukuk significantly hinders economic growth, whereas only the ZIS variable has a positive and significant impact. Long-term economic growth is positively impacted by the ZIS and Islamic financing variables, negatively impacted by sukuk, and not significantly impacted by Sharia stock. The Impulse Response Function and Variance Decomposition analysis results also demonstrate that the variables of the Islamic financial sector have a shock effect on Indonesia's economic growth, with ZIS funds making up the majority of the contribution and Sharia stocks the least.Implications – This study will help policymakers, industry, and academia accelerate the Islamic finance sector in Indonesia and strengthen its role in supporting and advancing Indonesia's economic recovery.Originality – Islamic finance, commonly known as Islamic banking–extends beyond Indonesian banks. Non-bank Islamic institutions, including capital markets and social finance, play a vital role in optimizing Islamic financial instruments for national economic growth.

The effect of Sharia monetary policy instruments and Islamic bank financing on economic growth and inflation

Purpose – This study aims to determine the influence of Open Market Operations (Sertifikat Bank Indonesia Syariah, SBIS), Sukuk of Bank Indonesia (Sukuk Bank Indonesia, SukBI), Bank Indonesia Sharia Deposit Facility (Fasilitas Simpanan Bank Indonesia, FASBIS), Islamic Interbank Money Market (IIMM/Pasar Uang Antar Bank Syariah, PUAS), and Islamic Bank Financing on economic growth and inflation in Indonesia. Methodology – This study uses the Vector Error Correction Model (VECM), which uses monthly data from January 2017 to December 2022.Findings – The results of the VECM analysis show that, in the short and long term, the FASBIS and PUAS variables significantly affect economic growth. The Covid-19 pandemic has a significant effect in the short term, whereas Islamic Bank Financing has a significant effect in the long term. In the Inflation model, only FASBIS has a significant short-term effect. In the long-term, FASBIS, PUAS, and Islamic Bank Financing significantly affect inflation. Implications – The results of this research suggest that the Government and Bank Indonesia will need to re-evaluate Sharia Open Market Operations, especially SBIS and SukBI instruments. This is the impact of the estimation results on the Open Market Operation variable, which are not significant, and the IRF results, which are negative in the Economic Growth Model and positive in the Inflation Model, indicating that the Open Market Operation variable actually inhibits economic growth and triggers inflation. Originality – This study discusses the influence of Sharia monetary instruments before and after the Covid-19 pandemic and adds the SukBI instrument as a Sharia monetary instrument.

Optimalisasi Pembiayaan Mudharabah Pada Bank Syariahdi Indonesia

This research is motivate d by the fact that Islamic banks in Indonesia are currently not optimal in channeling mudharabah financing. Islamic bank financing in Indonesia is still dominated by murabaha financing. The purpose of this study is to discuss in depth regarding the optimization of mudharabah financing in Islamic banks in Indonesia. A qualitative research approach is used in this research. This research uses secondary data or literature study. This study uses the qualitative data analysis technique modeled by Miles and Huberman. The results of this study indicate that if the percentage of mudharabah financing in Islamic banks in Indonesia is still relatively small, people tend to use murabahah financing rather than mudharabah financing. Then from the side of Islamic banks in Indonesia so far they have been trying to maximize the distribution of mudharabah financing.
 Keywords: optimization, mudharabah financing, islamic banks.

Non-performing Financing and Rate of Return on Mudharaba and Musharaka Contracts of Islamic Banks Before and During the COVID-19 Period

Non-performing Financing and Rate of Return on Mudharaba and Musharaka Contracts of Islamic Banks Before and During the COVID-19 Period

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.

THE IMPLEMENTATION OF MUSYARAKAH FINANCING IN ISLAMIC BANKS IN INDONESIA IN RELATION TO DEFAULTS BUSINESS PARTNERS

This research aims to analyze the implementation of musyarakah financing in Islamic banks in Indonesia related to the default of business partners. The principal banking law states that the function of banking in Indonesia is to collect and distribute funds. Islamic banking law regulates various types of financing, including musyarakah financing. The method used in this research is descriptive analytical method using qualitative approach. The results of this research discussion show that legal protection for the parties in musyarakah financing in the event of default by business partners consists of: first, legal protection provided by law, namely protected by the Banking Law, especially Articles 1, 7 and 8, second, legal protection based on musyarakah contracts/agreements, in the form of : First, if the business partner has been classified into the collectibility of bad debts, the bank can confiscate the collateral and then proceed with the auction. Second, submitting the dispute to a Islamic arbitration body or court. Meanwhile, the efforts of Islamic banks if there are indications that there will be defaults by business partners in musyarakah financing are to addendum the contract.

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.

The dynamics of savings associations (ROSCA) in the operation of good loan funds in Islamic banks

The recent past years have witnessed an increasing interest among researchers in Islamic economics in financing with a good loan, especially with the increasing increase in interest rates in commercial banks and the increase in profitability in Islamic banks. Organizing this process, and also turning away from devising ways of financing with a good loan, and this is the basis of the problem of this research. The aim of this research is to identify the most important expected effects of applying the system of savings associations (ROSCA) in the operation of good loan funds in Islamic banks, and to suggest an idea for the work of this system within these funds, as it shows the importance and status of the good loan in Islamic law, and discusses the jurisprudential opinion that This system is opposed to considering the jurisprudential rule that says "any loan that brings a benefit is usury," and the research mentions the many benefits that Islamic banks and their customers benefit from if this system is applied within them. The importance of this research lies in the fact that it devises a method of financing in the form of a good loan in Islamic banks and gives a proposal to apply it in it, and it gives solutions to many people in finding suitable financing for their problems or for their economic projects. The researcher assumes that the system of savings associations (ROSCA) is suitable for working in good loan funds in Islamic banks, but rather that it is one of the necessities for the continuation and enrichment of Islamic banking work.

Analyzing the Influence of Bank Competition on Credit Risk: Perspectives from Indonesia's Dual Banking System

This study analyzes the effect of competition banks on credit risk in the dual banking system in Indonesia. This research was conducted using a purposive sampling technique in selecting a sample of 5 conventional commercial banks and 5 Islamic commercial banks. The method used is the Generalized Method of Moments (GMM) from 2011 to 2020. Credit risk for Conventional Banks is measured by the value of Non-Performing Loan (NPL), while Islamic Bank Financing is measured by the value of Non-Performing Financing (NPF). The results of this study indicate that Return on Assets (ROA) for Conventional Banks and Islamic Banks has a significant effect on credit risk in the dual banking system, Loan to Deposit Ratio (LDR) for Conventional Banks does not have a significant effect on Non-Performing Loan (NPL) while Financing to Deposit Ratio (FDR) of Islamic Banks has a significant level 2 influence on Non-Performing Financing (NPF). Bank size does not have a significant influence on credit risk in the dual banking system, and the Lerner Index for Conventional Banks has a significant effect on Non-Performing Loan (NPL), while the Lerner Index for Islamic Banks has no effect on Non-Performing Financing (NPF). The Central Bank in making policies can see that the level of competition for banks in the dual banking system in Indonesia is categorized as a monopolistic competition market, where each bank has its own market segment so that it has market power that is strong enough to set prices that are relatively.

Pengaruh Inflasi, Pengangguran, Kemiskinan, Dan Pembiayaan Perbankan Terhadap Pertumbuhan Ekonomi Di Indonesia

One important aspect of national development is the development of a country with the ultimate goal of improving people's welfare. This happened in Indonesia. So, research should be carried out to find out what are the obstacles hindering Indonesia's economic growth. The purpose of this study is to find out how inflation, unemployment, poverty, Islamic banking financing affect Indonesia's economic growth partially and simultaneously. This study uses secondary information arranged in chronological order from 2014 to 2022. This information was obtained from the official websites of Bank Indonesia, the Central Bureau of Statistics and OJK. The independent variables in this study are inflation, unemployment, poverty, and Islamic banking financing, while the dependent variable is economic growth. This study uses multiple regression analysis, T-test, coefficient of determination, and F-test. The results of the research show that inflation, unemployment, poverty, bank financing simultaneously affect Indonesia's economic growth by 65.2%. Other variables not included in this study affect the remaining 34.8%.