Article Sidebar

Download
PDF
Statistic
Read Counter : 16 Download : 5

Downloads

Download data is not yet available.

Main Article Content

Abstract

Purpose – This study examines the effect of liquidity and solvency on Islamic microfinance institution (IMFI) efficiency and tests whether productive financing distribution strengthens these relationships.
Methodology – This study uses a quantitative explanatory design with survey data collected from 97 Islamic microfinance institutions in Central Java between March and May 2026. The data were analyzed using partial least squares structural equation modeling (PLS-SEM). The assessment covered indicator reliability, convergent validity, internal consistency, discriminant validity, common method bias, explanatory power, and bootstrapped path significance.
Findings – Liquidity has a significant positive effect on efficiency, whereas solvency has no significant direct effect. Productive financing distribution significantly moderates both the liquidity and solvency efficiency relationships. These results show that financial health improves efficiency when liquid funds and capital strength support income-generating financing rather than remaining as passive buffers.
Implications – Islamic microfinance managers should integrate liquidity planning, capital management, productive financing selection and repayment monitoring. Supervisors should support portfolio risk control, reporting discipline and managerial capacity building.
Originality – Unlike prior Islamic microfinance studies that mainly examine direct financial ratios, outreach, or efficiency scores, this study positions productive financing distribution as a moderating mechanism. It clarifies when financial health becomes an efficiency-enhancing resource for small Islamic financial intermediaries

Keywords

Efficiency Islamic microfinance Liquidity Productive financing Solvency

Article Details

License

Copyright (c) 2026 Yoiz Shofwa Shafrani, Sulasih Sulasih, Asep Amaludin

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).
How to Cite
Shafrani, Y. S., Sulasih, S., & Amaludin, A. (2026). Financial health, productive financing, and efficiency: Evidence from Islamic microfinance institutions. Jurnal Ekonomi & Keuangan Islam, 12(2), 308–322. https://doi.org/10.20885/JEKI.vol12.iss2.art6
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX
Crossref
Scopus
Google Scholar
Europe PMC

References

  1. Abdullahi, A., & Othman, A. H. A. (2021). Financial inclusion enhancement through the adoption of Islamic microfinance in Nigeria. International Journal of Ethics and Systems, 37(3), 486–505. https://doi.org/10.1108/IJOES-02-2021-0040
  2. Abebe, A., & Kegne, M. (2023). The role of microfinance institutions on women’s entrepreneurship development. Journal of Innovation and Entrepreneurship, 12(1), 17. https://doi.org/10.1186/s13731-023-00285-0
  3. Addury, M. M., & Ramadhani, A. K. P. (2024). The influence of financing model and credit risk on financial stability: Study of Islamic rural banks in Java Island. Journal of Islamic Monetary Economics and Finance, 10(3), 427–444. https://doi.org/10.21098/jimf.v10i3.1788
  4. Akasumbawa, M. D. D., Rukmana, L., Razali, R., & Mardika, A. (2025). What drives BPRS efficiency? A study of financial inclusion, bank characteristics, and macroeconomic factors. AT-TIJARAH: Jurnal Penelitian Keuangan Dan Perbankan Syariah, 7(1), 13–33. https://doi.org/10.52490/at-tijarah.v7i1.6027
  5. Alam, M. K., & Miah, M. S. (2024). Do Islamic banks use institutional theory in the light of Shariah governance? Empirical evidence from a Muslim dominant country. Heliyon, 10(2), e24252. https://doi.org/10.1016/j.heliyon.2024.e24252
  6. Baltas, K. N., & Liñares-Zegarra, J. M. (2025). Efficiency and financial risk management practices of microfinance institutions. International Journal of Finance and Economics, 30(2), 1011–1031. https://doi.org/10.1002/ijfe.2956
  7. Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108
  8. Beer, F. M., & Hattar, A. S. (2020). Capital Structure and Liquidity as Measures of Efficiency: The Case of Islamic Banks. International Journal of Business and Applied Social Science, 6(1), 23–29. https://doi.org/10.33642/ijbass.v6n1p3
  9. Ben Salem, A., & Ben Abdelkader, I. (2023). Diversification and performance of microfinance institutions: Does Islamic microfinance model matter? International Journal of Islamic and Middle Eastern Finance and Management, 16(5), 975–995. https://doi.org/10.1108/IMEFM-01-2022-0031
  10. Cohen, J. (1992). A Power Primer. Psychological Bulletin, 112(1), 155–159. https://doi.org/10.1037/0033-2909.112.1.155
  11. Cull, R., Demirgüc-Kunt, A., & Morduch, J. (2007). Financial Performance and Outreach: A Global Analysis of Leading Microbanks. The Economic Journal, 117, F107–F133. https://doi.org/10.1111/j.1468-0297.2007.02017.x
  12. Diamond, D. W. (1984). Financial Intermediation and Delegated Monitoring. The Review of Economic Studies, 51(3), 393–414. https://doi.org/10.2307/2297430
  13. Eltweri, A., Sawan, N., Al-Hajaya, K., & Badri, Z. (2024). The Influence of Liquidity Risk on Financial Performance: A Study of the UK’s Largest Commercial Banks. Journal of Risk and Financial Management, 17(12), 580. https://doi.org/10.3390/jrfm17120580
  14. Fakhrunnas, F., Nugrohowati, R. N. I., Haron, R., & Anto, M. B. H. (2022). The determinants of non-performing loans in the Indonesian banking industry: An asymmetric approach before and during the pandemic crisis. SAGE Open, 12(2), 1–13. https://doi.org/10.1177/21582440221102421
  15. Febianto, I., Johari, F. B., & Kefeli @ Zulkefli, Z. B. (2019). The Role of Islamic Microfinance For Poverty Alleviation in Bandung, Indonesia. Ihtifaz: Journal of Islamic Economics, Finance, and Banking, 2(1), 55–72. https://doi.org/10.12928/ijiefb.v2i1.736
  16. Fersi, M., & Boujelbène, M. (2023). Financial and social efficiency analysis of Islamic microfinance institutions. International Journal of Emerging Markets, 18(4), 931–957. https://doi.org/10.1108/IJOEM-02-2020-0197
  17. Fianto, B. A., Gan, C., Hu, B., & Roudaki, J. (2018). Equity Financing and Debt-Based Financing: Evidence from Islamic Microfinance Institutions in Indonesia. Pacific-Basin Finance Journal, 52, 163–172. https://doi.org/10.1016/j.pacfin.2017.09.010
  18. Fianto, B. A., Maulida, H., & Laila, N. (2019). Determining factors of non-performing financing in Islamic microfinance institutions. Heliyon, 5(8). https://doi.org/10.1016/j.heliyon.2019.e02301
  19. Fornell, C., & Larcker, D. F. (1981). Evaluating Structural Equation Models with Unobservable Variables and Measurement Error. Journal of Marketing Research, 18(1), 39–50. https://doi.org/10.2307/3151312
  20. Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2–24. https://doi.org/10.1108/EBR-11-2018-0203
  21. Hair, J. F., Sarstedt, M., Ringle, C. M., Sharma, P. N., & Liengaard, B. D. (2024). Going beyond the untold facts in PLS-SEM and moving forward. European Journal of Marketing, 58(13), 81–106. https://doi.org/10.1108/EJM-08-2023-0645
  22. Hassan, M. K., Khan, A., & Paltrinieri, A. (2019). Liquidity risk, credit risk and stability in Islamic and conventional banks. Research in International Business and Finance, 48, 17–31. https://doi.org/10.1016/j.ribaf.2018.10.006
  23. Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43(1), 115–135. https://doi.org/10.1007/s11747-014-0403-8
  24. Hermes, N., Lensink, R., & Meesters, A. (2011). Outreach and Efficiency of Microfinance Institutions. World Development, 39(6), 938–948. https://doi.org/10.1016/j.worlddev.2009.10.018
  25. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
  26. Keddad, B., & Obiang, J. R. (2024). Determinants of deposits volatility: The case of the microfinance sector in Gabon. Research in International Business and Finance, 67, 102108. https://doi.org/10.1016/j.ribaf.2023.102108
  27. Kendo, S., & Tchakounte, J. (2022). The drivers of the financial integration of microfinance institutions: Do financial development, agency costs and microfinance performance matter? The Quarterly Review of Economics and Finance, 84, 128–142. https://doi.org/10.1016/j.qref.2022.01.016
  28. Kock, N. (2015). Common Method Bias in PLS-SEM: A Full Collinearity Assessment Approach. International Journal of E-Collaboration, 11(4), 1–10. https://doi.org/10.4018/ijec.2015100101
  29. Kumar, N., & Asmare, A. S. (2024). Social versus financial performance: Evidence from microfinance institutions in Ethiopia. Social Responsibility Journal, 20(6), 1122–1137. https://doi.org/10.1108/SRJ-07-2023-0407
  30. Louati, S., Louhichi, A., & Boujelbene, Y. (2016). The risk-capital-efficiency trilogy: A comparative study between Islamic and conventional banks. Managerial Finance, 42(12), 1226–1252. https://doi.org/10.1108/MF-01-2016-0009
  31. Masrizal, M., Sukmana, R., Fianto, B. A., & Gultom, R. Z. (2023). Does economic freedom foster Islamic rural banks efficiency? Evidence from Indonesia. International Journal of Productivity and Performance Management, 72(9), 2538–2558. https://doi.org/10.1108/IJPPM-11-2021-0660
  32. Maulina, R., Dhewanto, W., & Faturohman, T. (2023). The integration of Islamic social and commercial finance: Systematic literature review, bibliometric analysis, conceptual framework, and future research opportunities. Heliyon, 9(11), e21612. https://doi.org/10.1016/j.heliyon.2023.e21612
  33. Mishra, D., Kandpal, V., Agarwal, N., & Srivastava, B. (2024). Financial inclusion and its ripple effects on socio-economic development: A comprehensive review. Journal of Risk and Financial Management, 17(3), 105. https://doi.org/10.3390/jrfm17030105
  34. Mujiatun, S., Trianto, B., Cahyono, E. F., & Rahmayati, R. (2023). The impact of marketing communication and Islamic financial literacy on Islamic financial inclusion and MSMEs performance: Evidence from halal tourism in Indonesia. Sustainability, 15(13), 9868. https://doi.org/10.3390/su15139868
  35. Mutamimah, M., Zaenudin, Z., & Cokrohadisumarto, W. B. M. (2022). Risk management practices of Islamic microfinance institutions to improve their financial performance and sustainability: A study on Baitut Tamwil Muhammadiyah, Indonesia. Qualitative Research in Financial Markets, 14(5), 679–696. https://doi.org/10.1108/QRFM-06-2021-0099
  36. Nguyen, L. Q. T., Matousek, R., & Muradoglu, G. (2024). Bank capital, liquidity creation and the moderating role of bank culture: An investigation using a machine learning approach. Journal of Financial Stability, 72, 101265. https://doi.org/10.1016/j.jfs.2024.101265
  37. Otoritas Jasa Keuangan (2024). Siaran pers: Dorong pengembangan usaha mikro, OJK luncurkan Roadmap Lembaga Keuangan Mikro (LKM) 2024-2028. In Otoritas Jasa Keuangan. Otoritas Jasa Keuangan. https://ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/OJK-Luncurkan-Roadmap-Lembaga-Keuangan-Mikro-(LKM)-2024-2028.aspx
  38. Otoritas Jasa Keuangan Provinsi Jawa Tengah (2025). Siaran pers KOJK Provinsi Jawa Tengah: Sektor jasa keuangan di Jawa Tengah stabil dan terjaga. In Otoritas Jasa Keuangan. Otoritas Jasa Keuangan. https://ojk.go.id/id/Publikasi/OJK-Daerah/Siaran-Pers-Daerah/Pages/Siaran-Pers-KOJK-Provinsi-Jawa-Tengah-Sektor-Jasa-Keuangan-di-Jawa-Tengah-Stabil-dan-Terjaga-Juli-2025.aspx
  39. Priyadi, U., Utami, K. D. S., Muhammad, R., & Nugraheni, P. (2021). Determinants of credit risk of Indonesian Sharīʿah rural banks. ISRA International Journal of Islamic Finance, 13(3), 284–301. https://doi.org/10.1108/IJIF-09-2019-0134
  40. Rahmatika, D., Andriansyah, Y., & Qubbaja, A. (2024). Evaluating supervisory roles in a rural Islamic bank in Indonesia. Journal of Islamic Economics Lariba, 10(2), 689–712. https://doi.org/10.20885/jielariba.vol10.iss2.art29
  41. Raimi, L., Abdur-Rauf, I. A., & Ashafa, S. A. (2024). Does Islamic sustainable finance support sustainable development goals to avert financial risk in the management of Islamic finance products? A critical literature review. Journal of Risk and Financial Management, 17(6), 236. https://doi.org/10.3390/jrfm17060236
  42. Riwu Kore, M. H., Rokhim, R., Rachmawati, R., & Sudhartio, L. (2024). Entrepreneurial orientation and social performance of microfinance institutions in Indonesia. International Journal of Social Economics, 51(7), 899–914. https://doi.org/10.1108/IJSE-06-2023-0478
  43. Rohman, P. S., Fianto, B. A., Ali Shah, S. A., Kayani, U. N., Suprayogi, N., & Supriani, I. (2021). A Review on Literature of Islamic Microfinance from 2010-2020: Lesson for Practitioners and Future Directions. Heliyon, 7(12), e08549. https://doi.org/10.1016/j.heliyon.2021.e08549
  44. Saeed, M., Izzeldin, M., Hassan, M. K., & Pappas, V. (2020). The inter-temporal relationship between risk, capital and efficiency: The case of Islamic and conventional banks. Pacific-Basin Finance Journal, 62, 101328. https://doi.org/10.1016/j.pacfin.2020.101328.