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January 13, 2021
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February 1, 2022
Published
April 27, 2022
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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.

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Copyright (c) 2022 MB Hendrie Anto, Faaza Fakhrunnas, Yunice Karina Tumewang

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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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