Article Sidebar

Download
Full text PDF
Statistic
Read Counter : 1033 Download : 942

Downloads

Download data is not yet available.

Main Article Content

Abstract

Purpose – In an uncertain economic condition, maintaining companies’ profitability is essential. This study aims to analyze and assess the factors that affect bank profitability by focusing on internal factors such as capital, size, asset quality, and liquidity risk. This study also observed the effect of Islamic and conventional banking in Indonesia with a comprehensive profitability analysis as measured by ROA, ROE, and NIM/NOM.
Methodology – The method used in this research was panel data regression. The data studied were derived from the quarterly reports of Islamic and conventional banking in Indonesia for five years, from 2016 to 2020.
Findings – The results showed that conventional banking in Indonesia had a higher level of profitability than Islamic banking. The profitability of conventional banks is significantly influenced by the level of equity, size, CKPN, and LDR. On the other hand, Islamic banking in Indonesia generally has a lower level of profitability, but in terms of individual performance, the value was not inferior to conventional banking. Variables that significantly influence the profitability of Islamic banking included equity, CKPN, and FDR.
Implication – Banks in Indonesia must improve their performance so that the development of asset size can be in line with the level of profitability generated, maintain asset quality so that the health of the bank is maintained, and has proportional equity and LDR/FDR value.
Originality – This research used three profitability ratios: ROA, ROE, and NIM/NOM, and analyzed Islamic and conventional banking, considering that Indonesia has a dual banking system, so the analysis carried out was more comprehensive.

Keywords

Islamic banking conventional banking profitability Economic Growth

Article Details

License

Copyright (c) 2022 Roisatun Kasanah

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
Author Biographies

Roisatun Kasanah, Islamic Economics Department, Faculty of Economics and Business, Airlangga University, Surabaya, Indonesia

Lecturer

Achmad Fadlil Abidillah, Islamic Economics Department, Faculty of Economics and Business, Airlangga University, Surabaya, Indonesia

Researcher

Sulistya Rusgianto, Islamic Economics Department, Faculty of Economics and Business, Airlangga University, Surabaya, Indonesia

Researcher

How to Cite
Kasanah, R., Abidillah, A. F. ., & Rusgianto, S. (2022). Assessing the internal factor affecting the bank profitability in Indonesia: Case of dual banking system. Jurnal Ekonomi & Keuangan Islam, 8(2), 167–181. https://doi.org/10.20885/JEKI.vol8.iss2.art2
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX
Crossref
Scopus
Google Scholar
Europe PMC

References

  1. Achsani, M. N. F. F., & Kassim, S. (2021). Determinant of Indonesian banking profitability: Case study dual banking system. International Journal of Islamic Economics and Finance (IJIEF), 4(SI), 1–18. https://doi.org/10.18196/ijief.v4i0.10464
  2. Adelopo, I., Lloydking, R., & Tauringana, V. (2018). Determinants of bank profitability before, during, and after the financial crisis. International Journal of Managerial Finance, 14(4), 378–398. https://doi.org/10.1108/IJMF-07-2017-0148
  3. Alharbi, A. T. (2017). Determinants of Islamic banks’ profitability: International evidence. International Journal of Islamic and Middle Eastern Finance and Management, 10(3), 331–350. https://doi.org/10.1108/IMEFM-12-2015-0161
  4. Ali, M., & Puah, C. H. (2019). The internal determinants of bank profitability and stability: An insight from banking sector of Pakistan. Management Research Review, 42(1), 49–67. https://doi.org/10.1108/MRR-04-2017-0103
  5. Almaqtari, F. A., Al-Homaidi, E. A., Tabash, M. I., & Farhan, N. H. (2019). The determinants of profitability of Indian commercial banks: A panel data approach. International Journal of Finance and Economics, 24(1), 168–185. https://doi.org/10.1002/ijfe.1655
  6. Alqahtani, F., & Mayes, D. G. (2018). Financial stability of Islamic banking and the global financial crisis: Evidence from the Gulf Cooperation Council. Economic Systems, 42(2), 346–360. https://doi.org/10.1016/j.ecosys.2017.09.001
  7. Alsharari, N. M., & Alhmoud, T. R. (2019). The determinants of profitability in Sharia-compliant corporations: Evidence from Jordan. Journal of Islamic Accounting and Business Research, 10(4), 546–564. https://doi.org/10.1108/JIABR-05-2016-0055
  8. Amzal, C. (2016). The impact of macroeconomic variables on Indonesia Islamic banks profitability. Jurnal Ekonomi dan Bisnis Islam, 2(1), 71-86. http://dx.doi.org/10.20473/jebis.v2i1.1968
  9. Chowdhury, M. (2015). Which is more important in terms of the profitability of Islamic banks: Bank specific factors or macroeconomic factors? An empirical study on Malaysian Islamic banks. European Journal of Islamic Finance, 2(1), 1–8. https://doi.org/10.13135/2421-2172/922
  10. Bank Indonesia. (2012). PBI no 14/15 tahun 2012. Bank Indonesia. https://www.bi.go.id/elicensing/helps/PBI%2014.2.2012%20-%20APMK.pdf
  11. Bank Indonesia. (2013). Peraturan Bank Indonesia No: 15/15/PBI/2013 tentang Giro Wajib Minimum. Badan Pemeriksa Keuangan. https://peraturan.bpk.go.id/Home/Details/136591/peraturan-bi-no-1515pbi2013-tahun-2013
  12. Batten, J., & Vo, X. V. (2019). Determinants of bank profitability evidence from Vietnam. Emerging Markets Finance and Trade, 55(6), 1417–1428. https://doi.org/10.1080/1540496X.2018.1524326
  13. Beck, T., Demirgüç-Kunt, A., & Merrouche, O. (2013). Islamic vs conventional banking: Business model, efficiency and stability. Journal of Banking and Finance, 37(2), 433–447. https://doi.org/10.1016/j.jbankfin.2012.09.016
  14. Ben Selma Mokni, R., & Rachdi, H. (2014). Assessing the bank profitability in the MENA region: A comparative analysis between conventional and Islamic bank. International Journal of Islamic and Middle Eastern Finance and Management, 7(3), 305–332. https://doi.org/10.1108/IMEFM-03-2013-0031
  15. Bank Indonesia. (2007). Peraturan Bank Indonesia Nomor:9/1/PBI/2007 Tentang Sistem Penilaian Tingkat Kesehatan Bank Umum Berdasarkan Prinsip Syariah Gubernur (2007). Otoritas Jasa Keuangan. https://www.ojk.go.id/id/regulasi/Documents/Pages/PBI-tentang-Penilaian-Tingkat-Kesehatan-Bank-Umum/96.pdf
  16. Dao, B. T. T., & Nguyen, D. P. (2020). Determinants of profitability in commercial banks in Vietnam, Malaysia, and Thailand. Journal of Asian Finance, Economics, and Business, 7(4), 133–143. https://doi.org/10.13106/JAFEB.2020.VOL7.NO4.133
  17. Fathoni, E. M. (2020). Pengaruh faktor financing, return, cost dan risk terhadap profitabilitas perbankan syariah di Indonesia periode 2015-2018 [Master’s thesis], Syarif Hidayatullah State Islamic University. Syarif Hidayatullah State Islamic University Jakarta institutional repository. https://repository.uinjkt.ac.id/dspace/bitstream/123456789/51295/1/ERIK%20MAHFUD%20FATHONI-FEB.pdf
  18. Giones, F., Brem, A., & Berger, A. (2019). Strategic decisions in turbulent times: Lessons from the energy industry. Business Horizons, 62(2), 215–225. https://doi.org/10.1016/j.bushor.2018.11.003
  19. Javaid, S., & Alalawi, S. (2018). Performance and profitability of Islamic banks in Saudi Arabia: An empirical analysis. Asian Economic and Financial Review, 8(1), 38–51. https://doi.org/10.18488/journal.aefr.2018.81.38.51
  20. Kasri, R. A., & Azzahra, C. (2020). Do Islamic banks more stable than conventional banks? Evidence from Indonesia. Jurnal Ekonomi & Keuangan Islam, 6(2), 149–164. https://doi.org/10.20885/jeki.vol6.iss2.art6
  21. Kuncoro, M. (2003). Metode riset untuk bisnis dan ekonomi. Jakarta; Erlangga.
  22. Majid, M. S. A., & Ulina, S. (2020). Does the 2008-global financial crisis matter for the determinants of conventional and Islamic banking performances in Indonesia? Jurnal Ekonomi & Keuangan Islam, 6(2), 77–90. https://doi.org/10.20885/jeki.vol6.iss2.art1
  23. Menicucci, E., & Paolucci, G. (2016). The determinants of bank profitability: Empirical evidence from European banking sector. Journal of Financial Reporting and Accounting, 14(1), 86–115. https://doi.org/10.1108/jfra-05-2015-0060
  24. Muhammad, R., & Triharyono, C. (2019). Analysis of islamic banking financial performance before, during and after global financial crisis. Jurnal Ekonomi & Keuangan Islam, 5(2), 80–86. https://doi.org/10.20885/jeki.vol5.iss2.art5
  25. Otoritas Jasa Keuangan. (2021a). Booklet perbankan Indonesia (edisi 8, p. 236). Otoritas Jasa Keuangan Departemen Perizinan dan Informasi Perbankan. https://www.ojk.go.id/id/kanal/perbankan/data-dan-statistik/booklet-perbankan-indonesia/default.aspx
  26. Otoritas Jasa Keuangan. (2021b). Sejarah perbankan syariah. Otoritas Jasa Keuangan. https://www.ojk.go.id/id/kanal/syariah/tentang-syariah/pages/sejarah-perbankan-syariah.aspx
  27. Otoritas Jasa Keuangan. (2021c). SPS Juni 2021. https://www.ojk.go.id/id/kanal/perbankan/tentang-perbankan/Pages/Tugas.aspx#
  28. Purwasih, H., & Wibowo, W. (2021). The determinants factors of profitability Islamic bank in Indonesia. Jurnal Muara Ilmu Ekonomi dan Bisnis, 5(1), 89. https://doi.org/10.24912/jmieb.v5i1.10023
  29. Said, M., & Ali, H. (2016). An analysis on the factors affecting profitability level of sharia banking in Indonesia. Banks and Bank Systems, 11(3), 28–36. https://doi.org/10.21511/bbs.11(3).2016.03
  30. Schoemaker, P. J. H., Heaton, S., & Teece, D. (2018). Innovation, dynamic capabilities, and leadership. California Management Review, 61(1), 15–42. https://doi.org/10.1177/0008125618790246
  31. Sufian, F., & Kamarudin, F. (2015). Determinants of revenue efficiency of Islamic banks: Empirical evidence from the Southeast Asian countries. International Journal of Islamic and Middle Eastern Finance and Management, 8(1), 36–63. https://doi.org/10.1108/IMEFM-12-2012-0114
  32. Sutriani, Tira, Fermayani, R. (2018). Analisis pengaruh CKPN, LDR, liquidity gap dan BOPO terhadap profitabilitas perbankan di Indonesia (studi kasus pada bank umum konvensional yang terdaftar di bursa efek Indonesia periode 2012-2016), Jurnal Profiet, 2(2), 8–15. https://ojs.stiepi.ac.id/index.php/profiet/article/view/46
  33. Varghese, N. V. (2009). Globalization, economic crisis, and national strategies for higher education development. International Institute for Educational Planning, September, 36. http://www.iiep.unesco.org/en/publication/globalization-economic-crisis-and-national-strategies-higher-education-development
  34. Zarrouk, H., Ben Jedidia, K., & Moualhi, M. (2016). Is Islamic bank profitability driven by the same forces as conventional banks? International Journal of Islamic and Middle Eastern Finance and Management, 9(1), 46–66. https://doi.org/10.1108/IMEFM-12-2014-0120
  35. Zulfikar, Z., Mujiyati, Bawono, A. D. B., & Wahyuni, S. (2019). Dampak kebijakan cadangan kerugian penurunan nilai pembiayaan musyarakah pada kinerja keuangan bank unit usaha syariah di Indonesia. Riset Akuntansi dan Keuangan Indonesia, 4(2), 43–52. http://journals.ums.ac.id/index.php/reaksi/index.