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Abstract

Purpose This study aims to assess the home financing credit risk performed by Islamic banks in Indonesia.


Methods A panel dynamic analysis is adopted to measure the bad loan performance before and during the Covid-19 pandemic. The observation period started from January 2016 to September 2020 with 1,881 observation periods of monthly panel data from the province level.


Findings The study finds a difference in bad loan performance before and during the Covid-19 pandemic. Before this pandemic, inflation has a positive and significant influence on non-performing financing in real estate, rental business, and company service. However, during the Covid-19 pandemic, a substantial and positive effect of inflation is found on the bad loan for personal flat and apartment ownership. On the other hand, a significant and negative impact of inflation is found on the bad home loan for personal business shop ownership.


Implication This analysis could trigger the government to provide financial assistance for those affected by the Covid-19 crisis. In addition to that, an Islamic bank is also expected to give financing allowances for them by providing an option of debt restructuration and rescheduling.


Originality ― This paper analyses the Islamic bank’s credit risk performance for home financing before and during the Covid-19 pandemic. This issue has not been presented in the literature to the best of our knowledge.

Article Details

How to Cite
Anto, M. H., Fakhrunnas, F., & Tumewang, Y. K. (2022). Islamic banks credit risk performance for home financing: Before and during Covid-19 pandemic. Economic Journal of Emerging Markets, 14(1), 113–125. https://doi.org/10.20885/ejem.vol14.iss1.art9

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