Economics, Finance, and Business Review

The impact of funding risk on the stability of Islamic rural banks in Indonesia

2025-08-20T09:59:40+00:00

This paper investigates the effect of funding risk, along with some control variables, including bank-specific and macroeconomic variables, on the stability of Islamic rural banks (IRBs) in Indonesia. Dynamic panel regression is applied. A two-step GMM is employed to quarterly data from 83 IRBs on Java Island from 2017 to 2021, utilizing unbalanced panel data. In addition, our study was split between large and small IRBs. The results suggest that funding risk positively affects stability, but it is more pronounced for small IRBs than for large IRBs. Banks with strong fundamentals, such as high assets, CAR, and efficiency, encourage bank stability, but high non-performing financings lower bank stability. Economic upturns also enhance bank stability. Policy implications include strengthening depositor confidence through product innovation and raising capital adequacy to enhance stability. First, IRBs should raise capital and mobilize public funds to strengthen stability. Second, IRBs should increase cost efficiency and manage their financing risk well to boost stability.

Do we need large Islamic rural banks?

2025-08-20T03:30:24+00:00

This study aims to examine the non-linear impact of bank size on the profitability of Islamic rural banks (IRBs). Our study selected 90 banks situated on the Java Island. The study period spans 2018-2021, with quarterly data. Our study employs a dynamic panel regression using the GMM method. The results indicate that assets positively affect profitability. More importantly, the impact of an asset on profitability is inverted. In addition, these findings suggest that strong bank fundamentals, derived from high efficiency and high CAR, positively impact profitability. Several policy implications can be drawn from our findings. First, each bank must have a minimum of assets to achieve high profitability, around 187 billion. Second, to increase their profitability, Islamic rural banks must have adequate capital and a high operating efficiency.

Can village funds reduce the poverty rate in Kalimantan?

2025-08-20T04:07:07+00:00

Village funds have been rolled out by the government since 2015. The purpose of this study is to analyze the effect of village funds on poverty on the island of Kalimantan. In addition, this study investigated whether village funds were very effective in reducing poverty rates during the COVID-19 pandemic on the island of Kalimantan. This study examined all 47 districts that received village funds in the 2015-2022 period. The analysis method used is panel data regression. The results show that village funds have a negative effect on poverty on the island of Kalimantan. This finding indicates that village funds can reduce poverty rates on the island of Kalimantan. More importantly, the interaction between the village fund and COVID-19 variables has a negative sign. This finding implies that village funds are very effective in reducing poverty rates during the COVID-19 pandemic. In addition to village funds, high economic growth can reduce poverty rates on the island of Kalimantan. This finding implies that the government must continue to increase village funds and carry out good monitoring so that village funds can effectively reduce poverty rates in the regions.

Determination of Islamic social responsibility disclosure in Indonesian sharia commercial banks

2025-09-02T04:55:22+00:00

This study aims to analyze the influence of financial performance, as represented by Return on Assets and Return on Equity, Financing to Deposit Ratio, Islamic Corporate Governance, and bank size, on Islamic Social Reporting disclosure (ISR) in Sharia Commercial Banks in Indonesia. This study employs a regression analysis of static panel data from eight Islamic commercial banks during the 2019-2023 period. The bank size has a significant positive influence on ISR. The FDR variable also showed a positive impact. In contrast, ROA, ROE, and ICG have not been shown to have a significant influence on ISR. These findings suggest that ISR disclosure is driven more by the visibility and availability of resources than by financial performance or formal governance alone. The implications of this study underscore the importance of regulators in promoting ISR transparency, particularly in large banks, as well as the need for Islamic banks to integrate ISR more strategically and comprehensively.

Islamic performance index and profitability with the moderating role of intellectual capital in Indonesian Islamic banks

2025-09-02T03:44:56+00:00

This study analyzes the influence of the Islamic Performance Index (IPI) and Intellectual Capital (IBVAIC) on profitability (Return on Assets), as well as the moderating role of IBVAIC, at 10 Islamic Commercial Banks (ICBs) in Indonesia from 2019 to 2024. Using a quantitative approach with a Common Effects Model (CEM), the results show that the independent variables collectively have a significant effect on the dependent variable. An R-squared value of 0.5610 indicates that the model explains 56.10% of the variation in the dependent variable. Partially, the Profit Sharing Ratio and Equitable Distribution Ratio show a significant negative influence. The study also finds that IBVAIC significantly moderates the relationship between all IPI indicators and profitability. This moderation is negative for the Profit Sharing, Zakat Performance, and Equitable Distribution ratios, but positive for the Islamic Income vs. Non-Islamic Income ratio. The findings highlight the complex interplay between Sharia compliance, intellectual capital, and financial performance. This study has significant policy implications, suggesting that bank management and regulators must strategically align intellectual capital management with Sharia principles to optimize profitability.