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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
Copyright (c) 2022 MB Hendrie Anto, Faaza Fakhrunnas, Yunice Karina Tumewang
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Economic Journal of Emerging Markets by Center for Economic Studies, Universitas Islam Indonesia is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
References
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- Anarfo, E. B., Abor, J. Y., Osei, K. A., & Syeke-Dako, A. (2019). Financial inclusion and financial sector development in Sub-Saharan Africa: A panel VAR approach. International Journal of Managerial Finance, 15(4), 444–463. https://doi.org/10.1108/IJMF-07-2018-0205
- Aviliani, A., Siregar, H., Maulana, T., & Hasanah, H. (2015). The impact of macroeconomic condition on the banks performance in Indonesia. Buletin Ekonomi Moneter Dan Perbankan, 17(4), 379–402. https://doi.org/10.21098/bemp.v17i4.503
- Bohl, M. T., & Siklos, P. L. (2018). The anatomy of infaltion: An economic history perspective (CAMA Wroking Paper 8/2018).
- Cheng, H., Cen, L., Wang, Y., & Li, H. (2020). Business cycle co-movements and transmission channels: Evidence from China. Journal of the Asia Pacific Economy, 25(2), 289–306. https://doi.org/10.1080/13547860.2019.1651185
- Claeys, G., Bénassy-quéré, A., Demertzis, M., & Zenios, S. (2020). The European Central Bank in the COVID-19 crisis: Whatever it takes, within its mandate.
- Fakhrunnas, F. (2020). Total financing of Islamic rural banks and regional macroeconomic factors: A dynamic panel approach. Jurnal Ekonomi & Studi Pembangunan, 21(1), 1–15. https://doi.org/10.18196/jesp.21.1.5028
- Fakhrunnas, F., Dari, W., & Mifrahi, M. N. (2018). Macroeconomic effect and risk-taking behavior in a dual banking system. Economic Journal of Emerging Market, 10(2), 165–176. https://doi.org/10.20885/ejem.vol10.iss2.art5
- Farahani, Y. G., & Dastan, M. (2013). Analysis of Islamic banks’ financing and economic growth: A panel cointegration approach. International Journal of Islamic and Middle Eastern Finance and Management, 6(2), 156–172. https://doi.org/10.1108/17538391311329842
- Fitriani, P. D. (2020). Analisis komparatif kinerja keuangan bank umum syariah pada masa pandemi Covid–19. Jurnal Ilmu Akuntansi Dan Bisnis Syariah, 2(2), 113–124. https://doi.org/10.15575/aksy.v2i2.9804
- Ghosh, S. (2016). Macroprudential policies, crsisis and risk-taking: Evidence from dual banking system in GCC countries. Journal of Islamic Accounting and Business Reseacrh, 7(1), 6–27.
- Hachicha, N., & Amar, A. Ben. (2012). Does Islamic bank financing contribute to economic growth? International Journal of Islamic and Middle Eastern Finance and Management, 8(3), 349–368. https://doi.org/10.1108/IMEFM-07-2014-0063
- Holtz-Eakin, D., Newey, W., & Rosen, H. S. (1988). Estimating vector autoregressions with panel data. Econometrica, 56(6), 1371–1395. https://doi.org/10.2307/1913103
- Iriani, L. D., & Yuliadi, I. (2015). The effect of macroeconomic variables on non performance financing of Islamic Banks in Indonesia. Economic Journal of Emerging Markets, 7(2), 120–134. https://doi.org/10.20885/ejem
- Karim, N. A., Al-Habshi, S. M. S. J., & Abduh, M. (2016). Macroeconomics indicators and bank stability: A case of banking in Indonesia. Buletin Ekonomi Moneter Dan Perbankan, 18(4), 431–448.
- Lin, H.-Y., Farhani, N. H., & Koo, M. (2016). The impact of macroeconomic factors on credit risk in conventional banks and Islamic banks: Evidence from Indonesia. International Journal of Financial Research, 7(4). https://doi.org/10.5430/ijfr.v7n4p105
- Louhichi, A., & Boujelbene, Y. (2016). Credit risk, managerial behaviour and macroeconomic equilibrium within dual banking systems: Interest-free vs. interest-based banking industries. Research in International Business and Finance, 38, 104–121. https://doi.org/10.1016/j.ribaf.2016.03.014
- Love, I., & Zicchino, L. (2006). Financial development and dynamic investment behavior: Evidence from panel VAR. The Quarterly Review of Economics and Finance, 46(2), 190–210. https://doi.org/10.1016/j.qref.2005.11.007
- Mishkin, F. (1999). Lessons from the Asian crisis. Journal of International Money and Finance, 18(18), 709–723. https://doi.org/10.1080/14649880050008827
- Mohamad, M. T., Hasbulah, M. H., & Razali, M. I. (2015). Risk-taking behavior and macroeconomic indicators of Islamic banks profitability in Malaysia. International Journal of Research, 3(2), 1–12.
- Mohd. Yusof, R., & Bahlous, M. (2013). Islamic banking and economic growth in GCC & East Asia countries. Journal of Islamic Accounting and Business Research, 4(2), 151–172. https://doi.org/10.1108/JIABR-07-2012-0044
- Ningsih, M. R., & Mahfudz, M. S. (2020). Dampak pandemi Covid-19 terhadap manajemen industri perbankan syariah: Analisis komparatif. Point: Jurnal Ekonomi Dan Manajemen, 2(1), 1–10.
- Otoritas Jasa Keuangan. (2020). Statistik perbankan syariah. Jakarta, Indonesia.
- Pedroni, P. (2000). Fully modified ols for heterogeneous cointegrated panels. Advances in Econometrics, 15, 93–130.
- Pedroni, P. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the econometric press. Econometric Theory, 20(3), 597–625. https://doi.org/10.1017/S0266466604203073
- Pesaran, M. H. (2012). On the interpretation of panel unit root tests. Economics Letters, 116(3), 545–546. https://doi.org/10.1016/j.econlet.2012.04.049
- Qu, Z., & Perron, P. (2007). Estimating and testing structural changes in multivariate regressions. Econometrica, 75(2), 459–502.
- Srairi, S. (2013). Ownership structure and risk-taking behaviour in conventional and Islamic banks: Evidence for MENA countries. Borsa Istanbul Review, 13(4), 115–127. https://doi.org/10.1016/j.bir.2013.10.010
- Statistics Indonesia. (2020). Ekonomi Indonesia triwulan II 2020. Statistics Indonesia.
- Sukharev, O. S. (2020). Economic crisis as a consequence Covid-19 virus attack: Risk and damage assessment. Quantitative Finance and Economics, 4(2), 274–293. https://doi.org/10.3934/QFE.2020013
- The Jakarta Post. (2020). Mortgage subsidies accessible to more citizens as Indonesia hit by pandemic. Retrieved from https://www.thejakartapost.com/news/2020/04/03/mortgage-subsidies-accessible-to-more-citizens-as-indonesia-hit-by-pandemic.html
- Trad, N., Trabelsi, M. A., & Goux, J. F. (2017). Risk and profitability of Islamic banks: A religious deception or an alternative solution? European Research on Management and Business Economics, 23(1), 40–45. https://doi.org/10.1016/j.iedeen.2016.09.001
- Ubaidillah, M., & Syah Aji, R. H. (2020). Tinjauan atas implementasi perpanjangan masa angsuran untuk pembiayaan di bank syariah pada situasi pandemi Covid-19. Islamic Banking: Jurnal Pemikiran Dan Pengembangan Perbankan Syariah, 6(1), 1–16.
- Zarrouk, H., Ben Jedidia, K., & Moualhi, M. (2016). Is islamic bank profitability driven by 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
References
Ahmed, A. (2010). Global financial crisis: An Islamic finance perspective. International Journal of Islamic and Middle Eastern Finance and Management, 3(4), 306–320. https://doi.org/10.1108/17538391011093252
Anarfo, E. B., Abor, J. Y., Osei, K. A., & Syeke-Dako, A. (2019). Financial inclusion and financial sector development in Sub-Saharan Africa: A panel VAR approach. International Journal of Managerial Finance, 15(4), 444–463. https://doi.org/10.1108/IJMF-07-2018-0205
Aviliani, A., Siregar, H., Maulana, T., & Hasanah, H. (2015). The impact of macroeconomic condition on the banks performance in Indonesia. Buletin Ekonomi Moneter Dan Perbankan, 17(4), 379–402. https://doi.org/10.21098/bemp.v17i4.503
Bohl, M. T., & Siklos, P. L. (2018). The anatomy of infaltion: An economic history perspective (CAMA Wroking Paper 8/2018).
Cheng, H., Cen, L., Wang, Y., & Li, H. (2020). Business cycle co-movements and transmission channels: Evidence from China. Journal of the Asia Pacific Economy, 25(2), 289–306. https://doi.org/10.1080/13547860.2019.1651185
Claeys, G., Bénassy-quéré, A., Demertzis, M., & Zenios, S. (2020). The European Central Bank in the COVID-19 crisis: Whatever it takes, within its mandate.
Fakhrunnas, F. (2020). Total financing of Islamic rural banks and regional macroeconomic factors: A dynamic panel approach. Jurnal Ekonomi & Studi Pembangunan, 21(1), 1–15. https://doi.org/10.18196/jesp.21.1.5028
Fakhrunnas, F., Dari, W., & Mifrahi, M. N. (2018). Macroeconomic effect and risk-taking behavior in a dual banking system. Economic Journal of Emerging Market, 10(2), 165–176. https://doi.org/10.20885/ejem.vol10.iss2.art5
Farahani, Y. G., & Dastan, M. (2013). Analysis of Islamic banks’ financing and economic growth: A panel cointegration approach. International Journal of Islamic and Middle Eastern Finance and Management, 6(2), 156–172. https://doi.org/10.1108/17538391311329842
Fitriani, P. D. (2020). Analisis komparatif kinerja keuangan bank umum syariah pada masa pandemi Covid–19. Jurnal Ilmu Akuntansi Dan Bisnis Syariah, 2(2), 113–124. https://doi.org/10.15575/aksy.v2i2.9804
Ghosh, S. (2016). Macroprudential policies, crsisis and risk-taking: Evidence from dual banking system in GCC countries. Journal of Islamic Accounting and Business Reseacrh, 7(1), 6–27.
Hachicha, N., & Amar, A. Ben. (2012). Does Islamic bank financing contribute to economic growth? International Journal of Islamic and Middle Eastern Finance and Management, 8(3), 349–368. https://doi.org/10.1108/IMEFM-07-2014-0063
Holtz-Eakin, D., Newey, W., & Rosen, H. S. (1988). Estimating vector autoregressions with panel data. Econometrica, 56(6), 1371–1395. https://doi.org/10.2307/1913103
Iriani, L. D., & Yuliadi, I. (2015). The effect of macroeconomic variables on non performance financing of Islamic Banks in Indonesia. Economic Journal of Emerging Markets, 7(2), 120–134. https://doi.org/10.20885/ejem
Karim, N. A., Al-Habshi, S. M. S. J., & Abduh, M. (2016). Macroeconomics indicators and bank stability: A case of banking in Indonesia. Buletin Ekonomi Moneter Dan Perbankan, 18(4), 431–448.
Lin, H.-Y., Farhani, N. H., & Koo, M. (2016). The impact of macroeconomic factors on credit risk in conventional banks and Islamic banks: Evidence from Indonesia. International Journal of Financial Research, 7(4). https://doi.org/10.5430/ijfr.v7n4p105
Louhichi, A., & Boujelbene, Y. (2016). Credit risk, managerial behaviour and macroeconomic equilibrium within dual banking systems: Interest-free vs. interest-based banking industries. Research in International Business and Finance, 38, 104–121. https://doi.org/10.1016/j.ribaf.2016.03.014
Love, I., & Zicchino, L. (2006). Financial development and dynamic investment behavior: Evidence from panel VAR. The Quarterly Review of Economics and Finance, 46(2), 190–210. https://doi.org/10.1016/j.qref.2005.11.007
Mishkin, F. (1999). Lessons from the Asian crisis. Journal of International Money and Finance, 18(18), 709–723. https://doi.org/10.1080/14649880050008827
Mohamad, M. T., Hasbulah, M. H., & Razali, M. I. (2015). Risk-taking behavior and macroeconomic indicators of Islamic banks profitability in Malaysia. International Journal of Research, 3(2), 1–12.
Mohd. Yusof, R., & Bahlous, M. (2013). Islamic banking and economic growth in GCC & East Asia countries. Journal of Islamic Accounting and Business Research, 4(2), 151–172. https://doi.org/10.1108/JIABR-07-2012-0044
Ningsih, M. R., & Mahfudz, M. S. (2020). Dampak pandemi Covid-19 terhadap manajemen industri perbankan syariah: Analisis komparatif. Point: Jurnal Ekonomi Dan Manajemen, 2(1), 1–10.
Otoritas Jasa Keuangan. (2020). Statistik perbankan syariah. Jakarta, Indonesia.
Pedroni, P. (2000). Fully modified ols for heterogeneous cointegrated panels. Advances in Econometrics, 15, 93–130.
Pedroni, P. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the econometric press. Econometric Theory, 20(3), 597–625. https://doi.org/10.1017/S0266466604203073
Pesaran, M. H. (2012). On the interpretation of panel unit root tests. Economics Letters, 116(3), 545–546. https://doi.org/10.1016/j.econlet.2012.04.049
Qu, Z., & Perron, P. (2007). Estimating and testing structural changes in multivariate regressions. Econometrica, 75(2), 459–502.
Srairi, S. (2013). Ownership structure and risk-taking behaviour in conventional and Islamic banks: Evidence for MENA countries. Borsa Istanbul Review, 13(4), 115–127. https://doi.org/10.1016/j.bir.2013.10.010
Statistics Indonesia. (2020). Ekonomi Indonesia triwulan II 2020. Statistics Indonesia.
Sukharev, O. S. (2020). Economic crisis as a consequence Covid-19 virus attack: Risk and damage assessment. Quantitative Finance and Economics, 4(2), 274–293. https://doi.org/10.3934/QFE.2020013
The Jakarta Post. (2020). Mortgage subsidies accessible to more citizens as Indonesia hit by pandemic. Retrieved from https://www.thejakartapost.com/news/2020/04/03/mortgage-subsidies-accessible-to-more-citizens-as-indonesia-hit-by-pandemic.html
Trad, N., Trabelsi, M. A., & Goux, J. F. (2017). Risk and profitability of Islamic banks: A religious deception or an alternative solution? European Research on Management and Business Economics, 23(1), 40–45. https://doi.org/10.1016/j.iedeen.2016.09.001
Ubaidillah, M., & Syah Aji, R. H. (2020). Tinjauan atas implementasi perpanjangan masa angsuran untuk pembiayaan di bank syariah pada situasi pandemi Covid-19. Islamic Banking: Jurnal Pemikiran Dan Pengembangan Perbankan Syariah, 6(1), 1–16.
Zarrouk, H., Ben Jedidia, K., & Moualhi, M. (2016). Is islamic bank profitability driven by 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