Main Article Content
Abstract
Purpose – This study analyzes the relationship between maqasid sharia and the stability of Islamic banks in Indonesia.
Methodology – This study uses annual balanced panel data of eight Islamic banks in Indonesia from to 2010-2020 and utilizes a random effects model (REM) approach with the generalized least squares (GLS) method. The dependent variable is the Z-score as a proxy for bank stability, and the independent variables are bank size, the maqasid index (MI), capital adequacy ratio (CAR), gross domestic product (GDP), inflation, and interest rate.
Findings – This research reveals that the stability of Islamic banking in Indonesia decreased over the study period, whereas maqasid performance increased. Furthermore, this study shows that the maqasid index and GDP negatively influence the Z-score, while bank size and CAR have a positive influence. We found no influence of inflation or the interest rate on the Z-score. The negative impact of the Maqasid index denotes poor management and financing quality, which is linked to the slanted achievement of the three Maqasid objectives (education, justice, and maslahah) during the study period.
Implications – Policymakers, industry, and academics can use the research findings as recommendations to strengthen the stability of Islamic banks and their role in promoting welfare.
Originality – This study employs the maqasid index as a proxy for Islamic bank performance to analyze its influence on bank stability.
Keywords
Article Details
Copyright (c) 2024 Adinda Lia Analia, Abdul Hakim, Mohammad Bekti Hendrie Anto, Andika Ridha Ayu Perdana
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References
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- Al Ghifari, M., Handoko, L. H., & Yani, E. A. (2013). Analisis kinerja perbankan syariah di Indonesia dan Malaysia dengan pendekatan maqashid indeks. Jurnal Ekonomi & Perbankan Islam, 13(2), 100–115. https://doi.org/https://doi.org/10.46899/jeps.v3i2.160
- 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
- Analia, A. L., & Anto, M. B. (2019). Performance measurement of Islamic banking in Indonesia using the maqashid sharia index method. Conference on Islamic Management, Accounting, and Economics (CIMAE) Proceeding, 2(1), 235–244. https://journal.uii.ac.id/CIMAE/article/view/12924/9472
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- Ashraf, D., Rizwan, M. S., & L’Huillier, B. (2016). A net stable funding ratio for Islamic Banks and its impact on financial stability: An international investigation. Journal of Financial Stability, 25, 47–57. https://doi.org/10.1016/j.jfs.2016.06.010
- Bakhouche, A., El Ghak, T., & Alshiab, M. (2022). Does Islamicity matter for the stability of Islamic banks in dual banking systems? Heliyon, 8(4), e09245. https://doi.org/10.1016/j.heliyon.2022.e09245
- 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
- Chakroun, M. A., & Gallali, M. I. (2015). Islamic banks and financial stability: An empirical analysis of the Gulf Countries. International Journal of Business and Commerce, 5(3), 64–87. http://www.imf.org/external/pubs/ft/wp/2008/wp0816.pdf
- Danlami, M. R., Abduh, M., & Abdul Razak, L. (2022). CAMELS, risk-sharing financing, institutional quality and stability of Islamic banks: Evidence from 6 OIC countries. Journal of Islamic Accounting and Business Research, 13(8), 1155–1175. https://doi.org/10.1108/JIABR-08-2021-0227
- Hwang, C. L. & Yoon, K. (1981). Multiple attribute decision making: Methods and applications, a state-of-the-art survey. Springer-Verlag. http://dx.doi.org/10.1007/978-3-642-48318-9
- Ibrahim, M. H., & Rizvi, S. A. R. (2017). Do we need bigger Islamic banks? An assessment of bank stability. Journal of Multinational Financial Management, 40, 77–91. https://doi.org/10.1016/j.mulfin.2017.05.002
- Joudar, F., Msatfa, Z., Metwalli, O., Mouabid, M., & Dinar, B. (2023). Islamic financial stability factors : An econometric evidence. Economies, 11(3), 1–13. https://doi.org/https://doi.org/10.3390/economies11030079
- 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
- Khattak, M. A., Hamid, B. A., Islam, M. U., & Ali, M. (2021). Competition, diversification, and stability in the Indonesian banking system. Buletin Ekonomi Moneter dan Perbankan, 24, 59–88. https://doi.org/10.21098/BEMP.V24I0.1481
- Miah, M. D., & Uddin, H. (2017). Efficiency and stability: A comparative study between islamic and conventional banks in GCC countries. Future Business Journal, 3(2), 172–185. https://doi.org/10.1016/j.fbj.2017.11.001
- Mohammed, M. O., Rajak, D. A., & Taib, F. M. (2008). The Performance Measures of Islamic Banking Based on the Maqasid Framework. IIUM International Accounting Conference (INTAC IV) (hal. 1-17). http://irep.iium.edu.my/10121/1/INTAC_4(accounting).Revised.pdf
- Mohammed, M. O., & Md Taib, F. (2015). Developing Islamic banking performance measures based on maqasid al-shari’ah framework: Cases of 24 selected banks. Journal of Islamic Monetary Economics and Finance, 1(1). 55–77). https://doi.org/10.21098/jimf.v1i1.483
- Nugroho, L., Hidayah, N., & Badawi, A. (2019). The Islamic banking, asset quality: “Does financing segmentation matters” (Indonesia evidence). Mediterranean Journal of Social Sciences, 9(5), 221–235. https://doi.org/10.2478/mjss-2018-0154
- Otoritas Jasa Keuangan. (2021). Laporan perkembangan keuangan syariah Indonesia, Otoritas Jasa Keuangan. https://www.ojk.go.id/id/kanal/syariah/data-dan-statistik/laporan-perkembangan-keuangan-syariah-indonesia/Pages/Laporan-Perkembangan-Keuangan-Syariah-Indonesia-2020.aspx
- Otoritas Jasa Keuangan. (2022). Siaran pers survei nasional literasi dan inklusi keuangan tahun 2022. Otoritas Jasa Keuangan (Issue November). https://ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/Survei-Nasional-Literasi-dan-Inklusi-Keuangan-Tahun-2022.aspx
- Pambuko, Z. B., Ichsan, N., & Anto, M. H. (2018). Islamic banks’ financial stability and its determinants: A comparison study with conventional banks in Indonesia. Iqtishadia, 11(2), 371. https://doi.org/10.21043/iqtishadia.v11i2.3346
- Rizvi, S. A. R., Narayan, P. K., Sakti, A., & Syarifuddin, F. (2020). Role of Islamic banks in Indonesian banking industry: An empirical exploration. Pacific Basin Finance Journal, 62(August 2018), 101117. https://doi.org/10.1016/j.pacfin.2019.02.002
- Satibi, E., Utami, W., & Nugroho, L. (2018). A comparison of sharia banks and conventional banks in terms of efficiency, asset quality and stability in Indonesia for the period 2008-2016. International Journal of Commerce and Finance, 4(1), 134–149. https://www.researchgate.net/publication/325284387S
- Soemitra, A., Ismal, R., & Al-butary, B. (2021). Maqasid sharia implementation in monetary policy : A literature study. 4(2), 150–165. https://doi.org/https://doi.org/10.29103/el-amwal.v4i2.5863
- Sudarsono, H., Afriadi, F., & Suciningtias, S. A. (2021). Do stability and size affect the profitability of Islamic rural bank in Indonesia?. Jurnal Ekonomi & Keuangan Islam, 7(2), 161-174. https://doi.org/10.20885/JEKI.vol7.iss 2.art5
- Trad, N., Rachdi, H., Hakimi, A., & Guesmi, K. (2017). Banking stability in the MENA region during the global financial crisis and the European sovereign debt debacle. Journal of Risk Finance, 18(4), 381–397. https://doi.org/10.1108/JRF-10-2016-0134
- Widarjono, A. (2020). Stability of Islamic banks in Indonesia: Autoregressive distributed lag approach. Jurnal Keuangan dan Perbankan, 24(1), 40–52. https://doi.org/10.26905/jkdp.v24i1.3932
- Widarjono, A., Anto, M. B. H., & Fakhrunnas, F. (2020). Financing risk in Indonesian Islamic rural banks: Do financing products matter? Journal of Asian Finance, Economics and Business, 7(9), 305–314. https://doi.org/10.13106/JAFEB.2020.VOL7.NO9.305
- Widarjono, A., & Rudatin, A. (2021). Financing diversification and Indonesian Islamic bank’s non-performing financing. Jurnal Ekonomi & Keuangan Islam, 7(1), 45–58. https://doi.org/10.20885/jeki.vol7.iss1.art4
- Zins, A., & Weill, L. (2017). Islamic banking and risk: The impact of Basel II. Economic Modelling, 64(April), 626–637. https://doi.org/10.1016/j.econmod.2017.05.001
References
Abidillah, A. F., Kasanah, R., & Rusgianto, S. (2022). Macroeconomic’s effect on Islamic and conventional banking profitability: Evidence from Indonesian dual-banking system. Jurnal Ekonomi & Keuangan Islam, 8(1), 1–16. https://doi.org/10.20885/jeki.vol8.iss1.art1
Adzhani, R., & Rini. (2017). Komparasi kinerja perbankan syariah di Asia dengan pendekatan maqasid syariah. Jurnal Akuntansi & Keuangan Islam, 5(1), 5–30. https://doi.org/10.35836/jakis.v5i1.11
Al Ghifari, M., Handoko, L. H., & Yani, E. A. (2013). Analisis kinerja perbankan syariah di Indonesia dan Malaysia dengan pendekatan maqashid indeks. Jurnal Ekonomi & Perbankan Islam, 13(2), 100–115. https://doi.org/https://doi.org/10.46899/jeps.v3i2.160
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
Analia, A. L., & Anto, M. B. (2019). Performance measurement of Islamic banking in Indonesia using the maqashid sharia index method. Conference on Islamic Management, Accounting, and Economics (CIMAE) Proceeding, 2(1), 235–244. https://journal.uii.ac.id/CIMAE/article/view/12924/9472
Antonio, M. S., Sanrego, Y. D., & Taufiq, M. (2012). An analysis of Islamic banking performance : maqashid index implementation in Indonesia and Jordania. Journal of Islamic Finance, 1(1), 12–29. https://journals.iium.edu.my/iiibf-journal/index.php/jif/article/view/2
Ashraf, D., Rizwan, M. S., & L’Huillier, B. (2016). A net stable funding ratio for Islamic Banks and its impact on financial stability: An international investigation. Journal of Financial Stability, 25, 47–57. https://doi.org/10.1016/j.jfs.2016.06.010
Bakhouche, A., El Ghak, T., & Alshiab, M. (2022). Does Islamicity matter for the stability of Islamic banks in dual banking systems? Heliyon, 8(4), e09245. https://doi.org/10.1016/j.heliyon.2022.e09245
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
Chakroun, M. A., & Gallali, M. I. (2015). Islamic banks and financial stability: An empirical analysis of the Gulf Countries. International Journal of Business and Commerce, 5(3), 64–87. http://www.imf.org/external/pubs/ft/wp/2008/wp0816.pdf
Danlami, M. R., Abduh, M., & Abdul Razak, L. (2022). CAMELS, risk-sharing financing, institutional quality and stability of Islamic banks: Evidence from 6 OIC countries. Journal of Islamic Accounting and Business Research, 13(8), 1155–1175. https://doi.org/10.1108/JIABR-08-2021-0227
Hwang, C. L. & Yoon, K. (1981). Multiple attribute decision making: Methods and applications, a state-of-the-art survey. Springer-Verlag. http://dx.doi.org/10.1007/978-3-642-48318-9
Ibrahim, M. H., & Rizvi, S. A. R. (2017). Do we need bigger Islamic banks? An assessment of bank stability. Journal of Multinational Financial Management, 40, 77–91. https://doi.org/10.1016/j.mulfin.2017.05.002
Joudar, F., Msatfa, Z., Metwalli, O., Mouabid, M., & Dinar, B. (2023). Islamic financial stability factors : An econometric evidence. Economies, 11(3), 1–13. https://doi.org/https://doi.org/10.3390/economies11030079
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
Khattak, M. A., Hamid, B. A., Islam, M. U., & Ali, M. (2021). Competition, diversification, and stability in the Indonesian banking system. Buletin Ekonomi Moneter dan Perbankan, 24, 59–88. https://doi.org/10.21098/BEMP.V24I0.1481
Miah, M. D., & Uddin, H. (2017). Efficiency and stability: A comparative study between islamic and conventional banks in GCC countries. Future Business Journal, 3(2), 172–185. https://doi.org/10.1016/j.fbj.2017.11.001
Mohammed, M. O., Rajak, D. A., & Taib, F. M. (2008). The Performance Measures of Islamic Banking Based on the Maqasid Framework. IIUM International Accounting Conference (INTAC IV) (hal. 1-17). http://irep.iium.edu.my/10121/1/INTAC_4(accounting).Revised.pdf
Mohammed, M. O., & Md Taib, F. (2015). Developing Islamic banking performance measures based on maqasid al-shari’ah framework: Cases of 24 selected banks. Journal of Islamic Monetary Economics and Finance, 1(1). 55–77). https://doi.org/10.21098/jimf.v1i1.483
Nugroho, L., Hidayah, N., & Badawi, A. (2019). The Islamic banking, asset quality: “Does financing segmentation matters” (Indonesia evidence). Mediterranean Journal of Social Sciences, 9(5), 221–235. https://doi.org/10.2478/mjss-2018-0154
Otoritas Jasa Keuangan. (2021). Laporan perkembangan keuangan syariah Indonesia, Otoritas Jasa Keuangan. https://www.ojk.go.id/id/kanal/syariah/data-dan-statistik/laporan-perkembangan-keuangan-syariah-indonesia/Pages/Laporan-Perkembangan-Keuangan-Syariah-Indonesia-2020.aspx
Otoritas Jasa Keuangan. (2022). Siaran pers survei nasional literasi dan inklusi keuangan tahun 2022. Otoritas Jasa Keuangan (Issue November). https://ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/Survei-Nasional-Literasi-dan-Inklusi-Keuangan-Tahun-2022.aspx
Pambuko, Z. B., Ichsan, N., & Anto, M. H. (2018). Islamic banks’ financial stability and its determinants: A comparison study with conventional banks in Indonesia. Iqtishadia, 11(2), 371. https://doi.org/10.21043/iqtishadia.v11i2.3346
Rizvi, S. A. R., Narayan, P. K., Sakti, A., & Syarifuddin, F. (2020). Role of Islamic banks in Indonesian banking industry: An empirical exploration. Pacific Basin Finance Journal, 62(August 2018), 101117. https://doi.org/10.1016/j.pacfin.2019.02.002
Satibi, E., Utami, W., & Nugroho, L. (2018). A comparison of sharia banks and conventional banks in terms of efficiency, asset quality and stability in Indonesia for the period 2008-2016. International Journal of Commerce and Finance, 4(1), 134–149. https://www.researchgate.net/publication/325284387S
Soemitra, A., Ismal, R., & Al-butary, B. (2021). Maqasid sharia implementation in monetary policy : A literature study. 4(2), 150–165. https://doi.org/https://doi.org/10.29103/el-amwal.v4i2.5863
Sudarsono, H., Afriadi, F., & Suciningtias, S. A. (2021). Do stability and size affect the profitability of Islamic rural bank in Indonesia?. Jurnal Ekonomi & Keuangan Islam, 7(2), 161-174. https://doi.org/10.20885/JEKI.vol7.iss 2.art5
Trad, N., Rachdi, H., Hakimi, A., & Guesmi, K. (2017). Banking stability in the MENA region during the global financial crisis and the European sovereign debt debacle. Journal of Risk Finance, 18(4), 381–397. https://doi.org/10.1108/JRF-10-2016-0134
Widarjono, A. (2020). Stability of Islamic banks in Indonesia: Autoregressive distributed lag approach. Jurnal Keuangan dan Perbankan, 24(1), 40–52. https://doi.org/10.26905/jkdp.v24i1.3932
Widarjono, A., Anto, M. B. H., & Fakhrunnas, F. (2020). Financing risk in Indonesian Islamic rural banks: Do financing products matter? Journal of Asian Finance, Economics and Business, 7(9), 305–314. https://doi.org/10.13106/JAFEB.2020.VOL7.NO9.305
Widarjono, A., & Rudatin, A. (2021). Financing diversification and Indonesian Islamic bank’s non-performing financing. Jurnal Ekonomi & Keuangan Islam, 7(1), 45–58. https://doi.org/10.20885/jeki.vol7.iss1.art4
Zins, A., & Weill, L. (2017). Islamic banking and risk: The impact of Basel II. Economic Modelling, 64(April), 626–637. https://doi.org/10.1016/j.econmod.2017.05.001