Determinants of Islamic commercial banks financing risk in Indonesia

Mella Katrina Sari

doi:10.20885/jielariba.vol2.iss2.art3

Submitted

July 18, 2016

Accepted

October 18, 2016

Published

November 26, 2016

Download

PDF

Statistic

Read Counter : 777 Download : 409

Abstract

This research is aimed to show the empirical evidence of the influence of Financing Expansion, Financing Quality, Financing to Deposit Ratio, and Return on Assets on financing risk in Islamic Commercial Banks in Indonesia. This research uses purposive sampling so that three Islamic Commercial Banks are choosen: Bank Syariah Mandiri, Bank Muamalat Indonesia, and Bank Mega Syariah Indonesia. The analysis method of this research is panel data regression analysis. This research applies Panel Unit Roots (PRUTS), model specification test using Fixed Effect Model, classical assumption test (Homoscedastic, Autocorrelation, and Prais-Winsten Regression), hypothesis testing with a significance level of 5%. The result shows that Financing Expansion and Return on Assets have a negative and significant influence on financing risk. Meanwhile, Financing Quality and Financing to Deposit Ratio have a positive and significant influence on financing risk.

Keywords

financing risk financing expansion financing quality financing to deposit ratio return on assets panel data

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:

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 acknowledgement of the work's authorship and initial publication in this journal.
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 acknowledgement of its initial publication in this journal.
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

Sari, M. K. (2016). Determinants of Islamic commercial banks financing risk in Indonesia. Journal of Islamic Economics Lariba, 2(2), 25–32. https://doi.org/10.20885/jielariba.vol2.iss2.art3

Download Citation

References

Adisaputra, I. (2012). Analisis faktor-faktor yang mempengaruhi.non performing loan pada PT. Bank Mandiri, Tbk. Universitas Hasanuddin [Undergraduate Thesis]. Retrieved from http://repository.unhas.ac.id/handle/123456789/1596
Ahmad, N. H., & Ahmad, S. N. (2004). Key factors influencing credit risk of Islamic bank: A Malaysian case. Journal of Muamalat and Islamic Finance Research, 1(1), 65â€“80. Retrieved from http://jmifr.usim.edu.my/for-readers/jmifr-vol-1-no-1-2004/48-key-factors-influencing-credit-risk-of-islamic-bank-a-malaysian-case
Ahmad, N. H., & Ariff, M. (2007). Multi-country study of bank credit risk determinants. International Journal of Banking and Finance, 5(1), 135â€“152. Retrieved from http://www.ijbf.uum.edu.my/images/pdf/5no1ijbf/6ijbf51.pdf
Ahmed, A. S., Takeda, C., & Thomas, S. (1999). Bank loan loss provisions: A reexamination of capital management, earnings management and signaling effects. Journal of Accounting and Economics, 28(1), 1â€“25. https://doi.org/10.1016/S0165-4101(99)00017-8
Al-Smadi, M. O., & Ahmad, N. H. (2009). Factors affecting banks credit risk: Evidence from Jordan. Sintok Kedah, Malaysia: College of Business, Universiti Utara Malaysia.
Angbazo, L. (1997). Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking. Journal of Banking & Finance, 21(1), 55â€“87. https://doi.org/10.1016/S0378-4266(96)00025-8
Astrini, K. S., Suwendra, I. W., & Suwarna, I. K. (2014). Pengaruh CAR, LDR, dan bank size terhadap NPL pada lembaga perbankan yang terdaftar di Bursa Efek Indonesia. Jurnal Jurusan Manajemen, 2(1), 1â€“8. Retrieved from https://ejournal.undiksha.ac.id/index.php/JJM/article/view/2101
Azeem, A., & Amara, K. (2014). Impact of profitability on quantum of non performing loans. International Journal of Multidisciplinary Consortium, 1(1), 1â€“14. Retrieved from http://ijmc.rtmonline.in/vol1iss1/04302.pdf
Baltagi, B. H. (2013). Econometric analysis of panel data (5th Ed.). New York, US: John Wiley & Sons, Inc.
Basel Committee on Banking Supervision. (2000). Principles for the management of credit risk. Basel, Switzerland: Bank of International Settlement.
Berger, A. N., & DeYoung, R. (1997). Problem loans and cost efficiency in commercial banks. Journal of Banking & Finance, 21(6), 849â€“870. https://doi.org/10.1016/S0378-4266(97)00003-4
Brewer, E., Jackson, W. E., & Mondschean, T. S. (1996). Risk, regulation, and S & L diversification into nontraditional assets. Journal of Banking & Finance, 20(4), 723â€“744. https://doi.org/10.1016/0378-4266(95)00022-4
Caprio, G., & Klingebiel, D. (1996). Bank insolvencies: Cross-country experience (Policy Research Working Paper No. WPS1620). Washington, DC, US. Retrieved from http://documents.worldbank.org/curated/en/761051468739458460/Bank-insolvencies-cross-country-experience
Cebenoyan, A. S., & Strahan, P. E. (2004). Risk management, capital structure and lending at banks. Journal of Banking & Finance, 28(1), 19â€“43. https://doi.org/10.1016/S0378-4266(02)00391-6
Chan, Y.-S., Greenbaum, S. I., & Thakor, A. V. (1986). Information reusability, competition and bank asset quality. Journal of Banking & Finance, 10(2), 243â€“253. https://doi.org/10.1016/0378-4266(86)90008-7
Das, A., & Ghosh, S. (2007). Determinants of credit risk in Indian state-owned banks: An empirical investigation. Economic Issues, 12(2), 48â€“66. Retrieved from https://mpra.ub.uni-muenchen.de/17301/
Dendawijaya, L. (2009). Manajemen perbankan. Jakarta, Indonesia: Ghalia Indonesia.
Ekanayake, E. M. N. N., & Azeez, A. A. (2015). Determinants of non-performing loans in licensed commercial banks: Evidence from Sri Lanka. Asian Economic and Financial Review, 5(6), 868â€“882. https://doi.org/10.18488/journal.aefr/2015.5.6/102.6.868.882
Eng, L. L., & Nabar, S. (2007). Loan loss provisions by banks in Hong Kong, Malaysia and Singapore. Journal of International Financial Management & Accounting, 18(1), 18â€“38. https://doi.org/10.1111/j.1467-646X.2007.01006.x
Faiz, I. A. (2010). Ketahanan kredit perbankan syariah terhadap krisis keuangan global. La_Riba, 4(2), 217â€“237. https://doi.org/10.20885/lariba.vol4.iss2.art5
Firmansyah, I. (2014). Determinant of non performing loan: The case of Islamic bank in Indonesia. Bulletin of Monetary Economics and Banking, 17(2), 241â€“258. https://doi.org/10.21098/bemp.v17i2.51
Godlewski, C. J. (2005). Bank capital and credit risk taking in emerging market economies. Journal of Banking Regulation, 6(2), 128â€“145. https://doi.org/10.1057/palgrave.jbr.2340187
Hamzah, A. A., & Krishnan, A. R. (2016). Measuring the efficiency of zakat collection process using data envelopment analysis. In AIP Conference Proceedings 1782 (pp. 40007â€“1â€“40007â€“6). https://doi.org/10.1063/1.4966074
Haryono, Y., Mohd. Ariffin, N., & Hamat, M. (2016). Factors affecting credit risk in Indonesian Islamic banks. Journal of Islamic Finance, 5(1), 12â€“25. Retrieved from http://journals.iium.edu.my/iiibf-journal/index.php/jif/article/view/95
Hassan, M. K. (1992). An empirical analysis of bank standby letters of credit risk. Review of Financial Economics, 2(1), 31â€“44.
Hassan, M. K. (1993). Capital market tests of risk exposure of loan sales activities of large U.S. commercial banks. Quarterly Journal of Economics, 31(1), 27â€“49. https://doi.org/10.2307/40473074
Hassan, M. K., Karels, G. V., & Peterson, M. O. (1994). Deposit insurance, market discipline and off-balance sheet banking risk of large U.S. commercial banks. Journal of Banking & Finance, 18(3), 575â€“593. https://doi.org/10.1016/0378-4266(94)90010-8
Inoguchi, M. (2016). Nonperforming loans and purchase of loans by public asset management companies in Malaysia and Thailand. Pacific Economic Review, 21(5), 603â€“631. https://doi.org/10.1111/1468-0106.12197
JimÃ©nez, G., & Saurina, J. (2004). Collateral, type of lender and relationship banking as determinants of credit risk. Journal of Banking & Finance, 28(9), 2191â€“2212. https://doi.org/10.1016/J.JBANKFIN.2003.09.002
McNeil, A. J., Frey, R., & Embrechts, P. (2015). Quantitative risk management: Concept, techniques and tools (Revised ed). New Jersey, US: Princeton University Press.
Md Amin, M. A., Sanusi, N. A., Kusairi, S., & Mohamed Abdallah, Z. (2014). Inverse relationship of financial risk and performance in commercial banks in Tanzania. Investment Management and Financial Innovations, 11(4), 274â€“291. Retrieved from https://businessperspectives.org/component/zoo/inverse-relationship-of-financial-risk-and-performance-in-commercial-banks-in-tanzania
Messai, A. S., & Jouini, F. (2013). Micro and macro determinantas of non performing loans. International Journal of Economics and Financial Issues, 3(4), 852â€“860. Retrieved from http://www.econjournals.com/index.php/ijefi/article/view/517
Misman, F. N. (2012). Financing structures, bank spesific variables, and credit risk: Malaysian Islamic banks. Journal of Business and Policy Research, 7(1 [Special Edition]), 102â€“114. Retrieved from http://wbiaus.org/6. Faridah.pdf
Muhammad. (2005). Manajemen pembiayaan bank syariah. Yogyakarta, Indonesia: UPP AMP YKPN.
Mulyono. (1999). Analisis laporan keuangan untuk perbankan. Jakarta, Indonesia: Djambatan.
Nor, A. M., & Ahmad, N. H. (2015). Impaired financing determinants of Islamic banks in Malaysia. Information Manajement and Business Review, 7(3), 17â€“25. Retrieved from https://ifrnd.org/journal/index.php/imbr/article/view/1149
Oktaviani, & Pangestuti, I. R. D. (2012). Pengaruh DPK, ROA, CAR, NPL, dan jumlah SBI terhadap penyaluran kredit perbankan (Studi pada bank umum go public di Indonesia periode 2008-2011). Diponegoro Journal of Management, 1(4), 430â€“438. Retrieved from https://ejournal3.undip.ac.id/index.php/djom/article/view/1096
Poetry, Z. D., & Sanrego, Y. D. (2011). Pengaruh variabel makro dan mikro terhadap NPL perbankan konvensional dan NPF perbankan syariah. Tazkia Islamic Finance and Business Review, 6(2), 79â€“104. Retrieved from http://tifbr-tazkia.org/index.php/TIFBR/article/view/53
Ramadiyah, R. (2014). Model sistem manajemen resiko perbankan syariah atas transaksi usaha masyarakat. Menara Riau: Jurnal Kewirausahaan, 13(2), 220â€“248. Retrieved from http://ejournal.uin-suska.ac.id/index.php/Menara/article/view/852
Sekaran, U., & Bougie, R. (2010). Research methods for business: A skill building approach. New Jersey, US: John Wiley & Sons, Ltd.
Setiawan, C., & Putri, M. E. (2013). Non-performing financing and bank efficiency of Islamic banks in Indonesia. Journal of Islamic Finance and Business Research, 2(1), 58â€“76. Retrieved from http://www.wbiaus.org/5. Chandra.pdf
Shrieves, R. E., & Dahl, D. (1992). The relationship between risk and capital in commercial banks. Journal of Banking & Finance, 16(2), 439â€“457. https://doi.org/10.1016/0378-4266(92)90024-T
Sinkey, J. F., & Greenawalt, M. B. (1991). Loan-loss experience and risk-taking behavior at large commercial banks. Journal of Financial Services Research, 5(1), 43â€“59. https://doi.org/10.1007/BF00127083
Suwarsi, A. A. (2009). Pengaruh loan to assets ratio, rate of return on loan ratio, capital adequacy ratio, dan non performing financing terhadap penyaluran pembiayaan: Studi kasus pada PT. Bank Syariah Mandiri Tbk. periode 2005-2007. UIN Sunan Kalijaga Yogyakarta [Undergraduate Thesis]. Retrieved from http://digilib.uin-suka.ac.id/2253/
Thomson, J. B. (1989). An analysis of bank failures: 1984 to 1989 (Federal Reserve Bank of Cleveland Working Paper No. WP 89-16). Retrieved from https://www.clevelandfed.org/newsroom-and-events/publications/working-papers/working-papers-archives/1989-working-papers/wp-8916-an-analysis-of-bank-failures-1984-to-1989.aspx

References

Adisaputra, I. (2012). Analisis faktor-faktor yang mempengaruhi.non performing loan pada PT. Bank Mandiri, Tbk. Universitas Hasanuddin [Undergraduate Thesis]. Retrieved from http://repository.unhas.ac.id/handle/123456789/1596

Ahmad, N. H., & Ahmad, S. N. (2004). Key factors influencing credit risk of Islamic bank: A Malaysian case. Journal of Muamalat and Islamic Finance Research, 1(1), 65â€“80. Retrieved from http://jmifr.usim.edu.my/for-readers/jmifr-vol-1-no-1-2004/48-key-factors-influencing-credit-risk-of-islamic-bank-a-malaysian-case

Ahmad, N. H., & Ariff, M. (2007). Multi-country study of bank credit risk determinants. International Journal of Banking and Finance, 5(1), 135â€“152. Retrieved from http://www.ijbf.uum.edu.my/images/pdf/5no1ijbf/6ijbf51.pdf

Ahmed, A. S., Takeda, C., & Thomas, S. (1999). Bank loan loss provisions: A reexamination of capital management, earnings management and signaling effects. Journal of Accounting and Economics, 28(1), 1â€“25. https://doi.org/10.1016/S0165-4101(99)00017-8

Al-Smadi, M. O., & Ahmad, N. H. (2009). Factors affecting banks credit risk: Evidence from Jordan. Sintok Kedah, Malaysia: College of Business, Universiti Utara Malaysia.

Angbazo, L. (1997). Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking. Journal of Banking & Finance, 21(1), 55â€“87. https://doi.org/10.1016/S0378-4266(96)00025-8

Astrini, K. S., Suwendra, I. W., & Suwarna, I. K. (2014). Pengaruh CAR, LDR, dan bank size terhadap NPL pada lembaga perbankan yang terdaftar di Bursa Efek Indonesia. Jurnal Jurusan Manajemen, 2(1), 1â€“8. Retrieved from https://ejournal.undiksha.ac.id/index.php/JJM/article/view/2101

Azeem, A., & Amara, K. (2014). Impact of profitability on quantum of non performing loans. International Journal of Multidisciplinary Consortium, 1(1), 1â€“14. Retrieved from http://ijmc.rtmonline.in/vol1iss1/04302.pdf

Baltagi, B. H. (2013). Econometric analysis of panel data (5th Ed.). New York, US: John Wiley & Sons, Inc.

Basel Committee on Banking Supervision. (2000). Principles for the management of credit risk. Basel, Switzerland: Bank of International Settlement.

Berger, A. N., & DeYoung, R. (1997). Problem loans and cost efficiency in commercial banks. Journal of Banking & Finance, 21(6), 849â€“870. https://doi.org/10.1016/S0378-4266(97)00003-4

Brewer, E., Jackson, W. E., & Mondschean, T. S. (1996). Risk, regulation, and S & L diversification into nontraditional assets. Journal of Banking & Finance, 20(4), 723â€“744. https://doi.org/10.1016/0378-4266(95)00022-4

Caprio, G., & Klingebiel, D. (1996). Bank insolvencies: Cross-country experience (Policy Research Working Paper No. WPS1620). Washington, DC, US. Retrieved from http://documents.worldbank.org/curated/en/761051468739458460/Bank-insolvencies-cross-country-experience

Cebenoyan, A. S., & Strahan, P. E. (2004). Risk management, capital structure and lending at banks. Journal of Banking & Finance, 28(1), 19â€“43. https://doi.org/10.1016/S0378-4266(02)00391-6

Chan, Y.-S., Greenbaum, S. I., & Thakor, A. V. (1986). Information reusability, competition and bank asset quality. Journal of Banking & Finance, 10(2), 243â€“253. https://doi.org/10.1016/0378-4266(86)90008-7

Das, A., & Ghosh, S. (2007). Determinants of credit risk in Indian state-owned banks: An empirical investigation. Economic Issues, 12(2), 48â€“66. Retrieved from https://mpra.ub.uni-muenchen.de/17301/

Dendawijaya, L. (2009). Manajemen perbankan. Jakarta, Indonesia: Ghalia Indonesia.

Ekanayake, E. M. N. N., & Azeez, A. A. (2015). Determinants of non-performing loans in licensed commercial banks: Evidence from Sri Lanka. Asian Economic and Financial Review, 5(6), 868â€“882. https://doi.org/10.18488/journal.aefr/2015.5.6/102.6.868.882

Eng, L. L., & Nabar, S. (2007). Loan loss provisions by banks in Hong Kong, Malaysia and Singapore. Journal of International Financial Management & Accounting, 18(1), 18â€“38. https://doi.org/10.1111/j.1467-646X.2007.01006.x

Faiz, I. A. (2010). Ketahanan kredit perbankan syariah terhadap krisis keuangan global. La_Riba, 4(2), 217â€“237. https://doi.org/10.20885/lariba.vol4.iss2.art5

Firmansyah, I. (2014). Determinant of non performing loan: The case of Islamic bank in Indonesia. Bulletin of Monetary Economics and Banking, 17(2), 241â€“258. https://doi.org/10.21098/bemp.v17i2.51

Godlewski, C. J. (2005). Bank capital and credit risk taking in emerging market economies. Journal of Banking Regulation, 6(2), 128â€“145. https://doi.org/10.1057/palgrave.jbr.2340187

Hamzah, A. A., & Krishnan, A. R. (2016). Measuring the efficiency of zakat collection process using data envelopment analysis. In AIP Conference Proceedings 1782 (pp. 40007â€“1â€“40007â€“6). https://doi.org/10.1063/1.4966074

Haryono, Y., Mohd. Ariffin, N., & Hamat, M. (2016). Factors affecting credit risk in Indonesian Islamic banks. Journal of Islamic Finance, 5(1), 12â€“25. Retrieved from http://journals.iium.edu.my/iiibf-journal/index.php/jif/article/view/95

Hassan, M. K. (1992). An empirical analysis of bank standby letters of credit risk. Review of Financial Economics, 2(1), 31â€“44.

Hassan, M. K. (1993). Capital market tests of risk exposure of loan sales activities of large U.S. commercial banks. Quarterly Journal of Economics, 31(1), 27â€“49. https://doi.org/10.2307/40473074

Hassan, M. K., Karels, G. V., & Peterson, M. O. (1994). Deposit insurance, market discipline and off-balance sheet banking risk of large U.S. commercial banks. Journal of Banking & Finance, 18(3), 575â€“593. https://doi.org/10.1016/0378-4266(94)90010-8

Inoguchi, M. (2016). Nonperforming loans and purchase of loans by public asset management companies in Malaysia and Thailand. Pacific Economic Review, 21(5), 603â€“631. https://doi.org/10.1111/1468-0106.12197

JimÃ©nez, G., & Saurina, J. (2004). Collateral, type of lender and relationship banking as determinants of credit risk. Journal of Banking & Finance, 28(9), 2191â€“2212. https://doi.org/10.1016/J.JBANKFIN.2003.09.002

McNeil, A. J., Frey, R., & Embrechts, P. (2015). Quantitative risk management: Concept, techniques and tools (Revised ed). New Jersey, US: Princeton University Press.

Md Amin, M. A., Sanusi, N. A., Kusairi, S., & Mohamed Abdallah, Z. (2014). Inverse relationship of financial risk and performance in commercial banks in Tanzania. Investment Management and Financial Innovations, 11(4), 274â€“291. Retrieved from https://businessperspectives.org/component/zoo/inverse-relationship-of-financial-risk-and-performance-in-commercial-banks-in-tanzania

Messai, A. S., & Jouini, F. (2013). Micro and macro determinantas of non performing loans. International Journal of Economics and Financial Issues, 3(4), 852â€“860. Retrieved from http://www.econjournals.com/index.php/ijefi/article/view/517

Misman, F. N. (2012). Financing structures, bank spesific variables, and credit risk: Malaysian Islamic banks. Journal of Business and Policy Research, 7(1 [Special Edition]), 102â€“114. Retrieved from http://wbiaus.org/6. Faridah.pdf

Muhammad. (2005). Manajemen pembiayaan bank syariah. Yogyakarta, Indonesia: UPP AMP YKPN.

Mulyono. (1999). Analisis laporan keuangan untuk perbankan. Jakarta, Indonesia: Djambatan.

Nor, A. M., & Ahmad, N. H. (2015). Impaired financing determinants of Islamic banks in Malaysia. Information Manajement and Business Review, 7(3), 17â€“25. Retrieved from https://ifrnd.org/journal/index.php/imbr/article/view/1149

Oktaviani, & Pangestuti, I. R. D. (2012). Pengaruh DPK, ROA, CAR, NPL, dan jumlah SBI terhadap penyaluran kredit perbankan (Studi pada bank umum go public di Indonesia periode 2008-2011). Diponegoro Journal of Management, 1(4), 430â€“438. Retrieved from https://ejournal3.undip.ac.id/index.php/djom/article/view/1096

Poetry, Z. D., & Sanrego, Y. D. (2011). Pengaruh variabel makro dan mikro terhadap NPL perbankan konvensional dan NPF perbankan syariah. Tazkia Islamic Finance and Business Review, 6(2), 79â€“104. Retrieved from http://tifbr-tazkia.org/index.php/TIFBR/article/view/53

Ramadiyah, R. (2014). Model sistem manajemen resiko perbankan syariah atas transaksi usaha masyarakat. Menara Riau: Jurnal Kewirausahaan, 13(2), 220â€“248. Retrieved from http://ejournal.uin-suska.ac.id/index.php/Menara/article/view/852

Sekaran, U., & Bougie, R. (2010). Research methods for business: A skill building approach. New Jersey, US: John Wiley & Sons, Ltd.

Setiawan, C., & Putri, M. E. (2013). Non-performing financing and bank efficiency of Islamic banks in Indonesia. Journal of Islamic Finance and Business Research, 2(1), 58â€“76. Retrieved from http://www.wbiaus.org/5. Chandra.pdf

Shrieves, R. E., & Dahl, D. (1992). The relationship between risk and capital in commercial banks. Journal of Banking & Finance, 16(2), 439â€“457. https://doi.org/10.1016/0378-4266(92)90024-T

Sinkey, J. F., & Greenawalt, M. B. (1991). Loan-loss experience and risk-taking behavior at large commercial banks. Journal of Financial Services Research, 5(1), 43â€“59. https://doi.org/10.1007/BF00127083

Suwarsi, A. A. (2009). Pengaruh loan to assets ratio, rate of return on loan ratio, capital adequacy ratio, dan non performing financing terhadap penyaluran pembiayaan: Studi kasus pada PT. Bank Syariah Mandiri Tbk. periode 2005-2007. UIN Sunan Kalijaga Yogyakarta [Undergraduate Thesis]. Retrieved from http://digilib.uin-suka.ac.id/2253/

Thomson, J. B. (1989). An analysis of bank failures: 1984 to 1989 (Federal Reserve Bank of Cleveland Working Paper No. WP 89-16). Retrieved from https://www.clevelandfed.org/newsroom-and-events/publications/working-papers/working-papers-archives/1989-working-papers/wp-8916-an-analysis-of-bank-failures-1984-to-1989.aspx

Determinants of Islamic commercial banks financing risk in Indonesia

Article Sidebar

Main Article Content

Abstract

Keywords

Article Details

References

References