Determinants of Islamic Bank Profitability: Evidence from Indonesia

Reference to this paper should be made as follows: Sukmaningrum, P.S; Pirzada, K; Rusmita, S.A; Hasib, F.F; Widiastuti, T; Hendratmi, A. 2020. Determinants of Islamic Bank Profitability: Evidence from Indonesia, J. Fin. Bank. Review, 5 (1): pp. 01 – 13. https://doi.org/10.35609/jfbr.2020.5.1(1)

13 Pages Posted: 22 Mar 2021

See all articles by GATR Journals Submitter

GATR Journals Submitter

Global Academy of Training and Research (GATR)

Puji Sucia Sukmaningrum

Airlangga University

Kashan Pirzada

Asian Research Institute for Corporate Governance (ARICG) and Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia, Sintok, Malaysia

Sylva Alif Rusmita

Airlangga University - Faculty of Economics and Business

Fatin Fadhilah Hasib

Airlangga University

Tika Widiastuti

Faculty of Economy and Business Airlangga University of Surabaya, Indonesia

Achsania Hendratmi

Airlangga University

Date Written: June 30, 2020

Abstract


Objective - Islamic Banks have a distinct advantage that is not only conduct a commercial operation, but to also conduct social operations. Therefore, Islamic Banks plays an important role in developing the Indonesian economy. The aim of this study is to investigate the impact of internal and external factors that affect the profitability of Islamic Banks in Indonesia.

Methodology/Technique – The methodology of this research is multiple regression. The object of this research is the Islamic banking industry in Indonesia. Internal factors include size, liquidity, asset quality, management, and efficiency ratio. External factors include interest rate and inflation. Return on Assets is used to measure profitability. The monthly data is collected from the financial reports of Islamic Banks between 2011 to 2016.

Findings – The findings show that size, liquidity, assets quality, management ratio, interest rate and inflation lead to a greater Return on Assets (profitability) in Islamic Banks in Indonesia. Efficiency however does not have a significant effect on profitability of Islamic Banks in Indonesia.

Novelty – Based on the results of this research, it can be concluded that the Islamic banking industry can use those variables to improve the profitability of Islamic banks in the future. In addition, there are two variables that affect the profitability of Islamic banking industry. For the Islamic banking industry should anticipate the movement of inflation and interest to improve the profitability of Islamic banks.

Type of Paper - Empirical paper.

Keywords: Islamic Banks; Profitability; Internal Factors; External Factors; Indonesia.

JEL Classification: G21, G24.

Suggested Citation

Submitter, GATR Journals and Sukmaningrum, Puji and Pirzada, Kashan and Rusmita, Sylva Alif and Hasib, Fatin Fadhilah and Widiastuti, Tika and Hendratmi, Achsania, Determinants of Islamic Bank Profitability: Evidence from Indonesia (June 30, 2020). Reference to this paper should be made as follows: Sukmaningrum, P.S; Pirzada, K; Rusmita, S.A; Hasib, F.F; Widiastuti, T; Hendratmi, A. 2020. Determinants of Islamic Bank Profitability: Evidence from Indonesia, J. Fin. Bank. Review, 5 (1): pp. 01 – 13. https://doi.org/10.35609/jfbr.2020.5.1(1), Available at SSRN: https://ssrn.com/abstract=3659192

GATR Journals Submitter (Contact Author)

Global Academy of Training and Research (GATR) ( email )

Suite 15
Taman Bukit Angkasa, Kuala Lumpur 59200
Malaysia

Puji Sukmaningrum

Airlangga University ( email )

Jl. Darmawangsa Dalam 2
Surabaya, 60286
Indonesia

Kashan Pirzada

Asian Research Institute for Corporate Governance (ARICG) and Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia, Sintok, Malaysia

Sintok
COLGIS, UUM
Sintok, KY KEDAH DARUL 06010
Malaysia

Sylva Alif Rusmita

Airlangga University - Faculty of Economics and Business

Airlangga 4-6
Surabaya, East Java
Indonesia

Fatin Fadhilah Hasib

Airlangga University ( email )

Jl. Darmawangsa Dalam 2
Surabaya, 60286
Indonesia

Tika Widiastuti

Faculty of Economy and Business Airlangga University of Surabaya, Indonesia ( email )

Jl. Darmawangsa Dalam 2
Surabaya, 60286
Indonesia

Achsania Hendratmi

Airlangga University ( email )

Jl. Darmawangsa Dalam 2
Surabaya, 60286
Indonesia

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