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Abstract

Purpose – This study examines the key factors driving profit-sharing financing growth in Indonesian Islamic banks and offers insights into post-Covid-19 recovery strategies.
Methodology – This study used the ECM and ARDL methods to analyze short-term adjustments and long-term dynamics in 35 Indonesian Islamic banks.
Findings – The results indicate that money supply, liquidity ratio, and financial profitability drive both short- and long-term growth in profit-sharing financing. Conversely, inflation and financial risk negatively affect the long-term expansion of such financing. Meanwhile, exchange rates, interest rates, and operational efficiency do not have a significant influence. Additionally, the findings highlight that long-term relationships in profit-sharing financing remain stable, with temporary short-term imbalances.
Implications – This study provides evidence for policymakers and Islamic bank management to develop strategies to enhance profit-sharing financing, support Islamic banking growth, and guide post-Covid-19 recovery policies. Insights highlight key areas for strengthening Islamic banking operations in Indonesia.
Originality – This study builds on previous research by applying the ECM and ARDL frameworks, providing a more comprehensive analysis of profit-sharing financing determinants in Indonesian Islamic banking.

Keywords

Profit-sharing financing Islamic Banking banking policy COVID-19 crisis Indonesia

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Copyright (c) 2025 Sandi Sandia, Ascarya Ascarya , Sulaeman Sulaeman

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How to Cite
Sandia, S. ., Ascarya , A. ., & Sulaeman, S. (2025). Examining profit-sharing financing dynamics in Indonesian Islamic banking: ECM and ARDL approaches. Jurnal Ekonomi & Keuangan Islam, 11(2), 211–226. https://doi.org/10.20885/JEKI.vol11.iss2.art4
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