The Determinants Factors of Islamic Bank Profitability (Indonesia Empirical Cases)

Keywords: Islamic bank, Financing, Micro and Small Financing, Promotion, Financing Quality, Productivity


This study aims to analyze the effect of financing distribution (FDR), lending to micro and small business segments (MSF), promotion cost ratio (PCR), loan quality (NPF), and employee productivity ratio (LCR) on the profitability ratio of Islamic banks (Return on Assets-ROA). The method used in this study is a quantitative method using multiple regression models. The data used is secondary data from Islamic banks published during the 2012-2018 period. Furthermore, the number of samples from this study amounted to 42 samples of Islamic commercial banks. The results of this study are that the distribution of financing (FDR) has a positive and significant effect on the performance of Islamic banks (ROA), and the distribution of financing to the micro and small business segment has a positive and significant effect on the performance of Islamic banks (ROA). In addition, promotional activities and employee productivity also have a positive and significant impact on the performance of Islamic banks (ROA). At the same time, the quality of financing has a negative and significant influence on the performance of Islamic banks (ROA). The research implications are to provide information related to Islamic bank performance research regarding promotion effectiveness and employee productivity.

Author Biography

Lucky Nugroho, Mercu Buana University

Micro Banking


M. A. Choudhury, M. S. Hossain, e M. T. Mohammad, «Islamic finance instruments for promoting long-run investment in the light of the well-being criterion (maslaha)», J. Islam. Account. Bus. Res., vol. 10, fasc. 2, pp. 315–339, 2019, doi: 10.1108/JIABR-11-2016-0133.

L. Nugroho, T. C. Husnadi, W. Utami, e N. Hidayah, «Maslahah and Strategy to Establish A Single State-Owned Islamic Bank in Indonesia», Tazkia Islam. Finance Bus. Rev., vol. 10, fasc. 1, pp. 17–33, giu. 2017.

L. Nugroho, «Problematika Bank Syariah», in Bank Syariah tidak Syariah?, Acrh: Fakultas Ekonomi dan Bisnis Islam IAIN Lhokseumawe, 2022, pp. 197–207.

L. H. Aziz et al., Akuntansi Syariah (Sebuah Tinjauan Teori Dan Praktis), First. Bandung: Penerbit Widina Bhakti Persada Bandung, 2021.

N. Ihwanudin et al., Pengantar Perbankan Syariah (Konsep, Regulasi & Praktis). Widina Bhakti Persada Bandung, 2020.

L. Nugroho, E. Nugraha, e A. Badawi, «Comparative Analysis of The Effect of Loan/Financing To Deposit Ratio, Labor Costs Growth and Promotion Costs Growth to Returns on Assets in Islamic Banks and Conventional Banks in Indonesia», Int. J. Commer. Finance, vol. 7, fasc. 2, pp. 21–49, 2021.

L. Nugroho, A. A. Mastur, Harnovinsah, e W. Aryanti, «The Contribution of Islamic Bank in Poverty Alleviation», Al-Ahkam J. Pemikir. Huk. Islam, vol. 30, fasc. 1, pp. 19–38, 2020.

L. Nugroho, A. Badawi, E. Nugraha, e Y. M. Putra, «What Determines Islamic Performance Ratio of Islamic Banking in Indonesia: An Analysis Using Financing Deposit to Ratio as Moderator», SHARE J. Ekon. Dan Keuang. Islam, vol. 10, fasc. 1, pp. 104–123, 2021, doi: 10.22373/share.v10i1.9314.

C. Sukmadilaga e L. Nugroho, Pengantar Akuntansi Perbankan Syariah Prinsip, Praktik dan Kinerja., First., fasc. 1. Lampung: Pusaka Media, 2017.

A. W. Dusuki, «Banking for the Poor: The Role of Islamic Banking in Microfinance Initiatives», in Proceedings of the 2nd Islamic Conference 2007 (iECONS2007), 2007, vol. 2007, pp. 1–29.

W. Arafah e L. Nugroho, «Maqhashid Sharia in Clean Water Financing Business Model at Islamic Bank», Int. J. Bus. Manag. Invent. IJBMI, vol. 5, fasc. 2, pp. 22–32, mag. 2016.

L. Nugroho, N. Hidayah, A. Badawi, e A. J. Ali, «Socialization of mobile banking and internet banking for mikro and small entrepreneur (gender and business sector perspective- Kemayoran night market community)», ICCD, vol. 2, fasc. 1, pp. 419–426, 2019.

D. Karlan e M. Valdivia, «Teaching entrepreneurship: Impact of business training on microfinance clients and institutions», Rev. Econ. Stat., vol. 93, fasc. 2, pp. 510–527, 2011, doi: 10.1162/REST_a_00074.

L. Nugroho, «Challenges Sharia Microfinance Institutions: Evidence from Indonesia», Eur. J. Islam. Finance, vol. 1, pp. 1–6, 2014.

M. Albaity e M. Rahman, «The intention to use Islamic banking: an exploratory study to measure Islamic financial literacy», Int. J. Emerg. Mark., vol. 14, fasc. 5, pp. 988–1012, 2019, doi: 10.1108/IJOEM-05-2018-0218.

F. Mahliza, L. Nugroho, e A. J. Ali, «Antecedents and Consequences of Muslim Millennials Attitude Towards Halal Personal Care Products», IKONOMIKA, vol. 5, fasc. 2, pp. 249–270, 2020, doi: 10.24042/febi.v5i2.7203.

L. J. Bergsma, «Empowerment education: The link between media literacy and health promotion», Am. Behav. Sci., vol. 48, fasc. 2, pp. 152–164, 2004, doi: 10.1177/0002764204267259.

A. G. Ayayi e M. Sene, «What Drives Microfinance Institution’s Financial Sustainability», J. Dev. Areas, vol. 44, fasc. 1, pp. 303–324, 2010.

L. Nugroho e A. Malik, «Determinasi Kualitas Kredit Kepemilikan Rumah (KPR) Berdasarkan Perspektif Sumber Angsuran dan Rasio Fraud Account Officer», Moneter, vol. 7, fasc. 1, pp. 71–79, 2020.

L. Nugroho, W. Villaroel, e W. Utami, «The Challenges of Bad Debt Monitoring Practices in Islamic Micro Banking», Eur. J. Islam. Finance, vol. 11, pp. 1–11, 2018.

H. Bester, «Screening vs . Rationing in Credit Markets with Imperfect Information», Am. Econ. Rev., vol. 75, fasc. 4, pp. 850–855, 2016.

S. Soekapdjo, L. Nugroho, A. Badawi, e W. Utami, «Bad Debt Issues in Islamic Bank: Macro and Micro Influencing (Indonesia Cases)», Int. J. Commer. Finance, vol. 4, fasc. 1, pp. 10–26, 2018.

J. Kandampully, «Innovation as the core competency of a service organisation: The role of technology, knowledge and networks», Eur. J. Innov. Manag., vol. 5, fasc. 1, pp. 18–26, 2002, doi: 10.1108/14601060210415144.

M. Jensen e W. Meckling, «Theory of the firm: Managerial behaviour, agency costs and ownership», Strateg. Manag. J., vol. 21, fasc. 4, pp. 1215–1224, 1976.

M. E. Lubis e A. Soemitra, «Impact Of Dual Banking System On Financial Performance Sharia Bank In Indonesia: Study Of Literature And Perspectives Of Postgraduate Students In Sharia Economy», Int. J. Cult. Soc. Sci., vol. 3, fasc. 2, pp. 168–176, 2022.

E. Kastratovic, M. Kalicanin, e Z. Kalicanin, «Features of cash flow compared to profit», Int. Rev., fasc. 3–4, pp. 50–56, 2017, doi: 10.5937/intrev1704050k.

I. Supriani, B. A. Fianto, N. N. Fauziah, e R. R. Maulayati, «Revisiting the Contribution of Islamic Banks’ Financing to Economic Growth: The Indonesian Experience», Shirkah J. Econ. Bus., vol. 6, fasc. 1, pp. 18–37, 2021, doi: 10.22515/shirkah.v6i1.383.

A. Wajdi Dusuki, «Banking for the poor: the role of Islamic banking in microfinance initiatives», Humanomics, vol. 24, fasc. 1, pp. 49–66, 2008.

I. A. Aramburu e I. G. Pescador, «The Effects of Corporate Social Responsibility on Customer Loyalty: The Mediating Effect of Reputation in Cooperative Banks Versus Commercial Banks in the Basque Country», J. Bus. Ethics, vol. 154, fasc. 3, pp. 701–719, 2019, doi: 10.1007/s10551-017-3438-1.

M. Knell e H. Stix, «Trust in Banks during Normal and Crisis Times — Evidence from Survey Data», Economica, vol. 82, fasc. December 2015, pp. 995–1020, 2022.

S. Sharifi, A. Haldar, e S. V. D. N. Rao, «The relationship between credit risk management and non-performing assets of commercial banks in India», Manag. Finance, vol. 45, fasc. 3, pp. 399–412, 2019, doi: 10.1108/MF-06-2018-0259.

H. M. Awan, A. N. Siddiquei, e Z. Haider, «Factors affecting Halal purchase intention – evidence from Pakistan’s Halal food sector», Manag. Res. Rev., vol. 38, fasc. 6, pp. 640–660, 2015, doi: 10.1108/mrr-01-2014-0022.

C. Jeske, «Why work? Do we understand what motivates work-related decisions in South Africa?», J. South. Afr. Stud., vol. 44, fasc. 1, pp. 27–42, 2018, doi: 10.1080/03057070.2018.1403219.

R. Abdullah, R. Chauhan, R. Kurniawan, N. Rajpurohit, e A. Hubur, «Entire System of Wages and Rewards To Increase Productivity in Factory», Linguist. Cult. Rev., vol. 5, fasc. S1, pp. 394–403, 2021, doi: 10.21744/lingcure.v5ns1.1405.

R. K. Prasad e M. K. Jha, «Consumer buying decisions models: A descriptive study», Int. J. Innov. Appl. Stud. ISSN, vol. 6, fasc. 3, pp. 2028–9324, 2014.

S. A. A. Shah, R. Sukmana, e B. A. Fianto, «Integration of Islamic bank specific risks and their impact on the portfolios of Islamic Banks», Int. J. Islam. Middle East. Finance Manag., vol. 14, fasc. 3, pp. 561–578, 2020, doi: 10.1108/IMEFM-01-2020-0021.

Y. Y. Lee, M. H. Dato Haji Yahya, M. S. Habibullah, e Z. Mohd Ashhari, «Non-performing loans in European Union: country governance dimensions», J. Financ. Econ. Policy, vol. 12, fasc. 2, pp. 209–226, 2020, doi: 10.1108/JFEP-01-2019-0027.

B. R. Lensberg, M. F. Drummond, N. Danchenko, N. Despiégel, e C. François, «Challenges in measuring and valuing productivity costs, and their relevance in mood disorders», Clin. Outcomes Res., vol. 5, fasc. 1, pp. 565–573, 2013, doi: 10.2147/CEOR.S44866.

P. D. Dunlop e K. Lee, «Workplace deviance, organizational citizenship behavior, and business unit performance: The bad apples do spoil the whole barrel», J. Organ. Behav., vol. 25, fasc. 1, pp. 67–80, 2004, doi: 10.1002/job.243.

M. Do Rosário Cabrita e N. Bontis, «Intellectual capital and business performance in the Portuguese banking industry», Int. J. Technol. Manag., vol. 43, fasc. 1–3, pp. 212–237, 2008, doi: 10.1504/IJTM.2008.019416.

N. Hidayah, A. Badawi, L. Nugroho, e Moetopo, «Human Capital And The Use Of Information Technology To Enhance Sustainable Competitive Advantages», Arch. Bus. Res., vol. 8, fasc. 6, pp. 239–249, 2020, doi: 10.14738/abr.86.8536.

J. Kaczmarek, «The mechanisms of creating value vs. financial security of going concern- sustainable management», Sustainability, vol. 11, fasc. 8, p. 2278, 2019, doi: 10.3390/su11082278.

Y. A. Pravasanti, «Pengaruh NPF dan FDR Terhadap CAR dan Dampaknya Terhadap ROA Pada Perbankan Syariah Di Indonesia», J. Ilm. Ekon. Islam, vol. 4, fasc. 03, p. 148, 2018, doi: 10.29040/jiei.v4i03.302.

I. Ghozali, Aplikasi Analisis Multivariate dengan Program IBM SPSS 21 Update PLS Regresi. Semarang: Undip Press, 2013.

I. Ghozali, «Aplikasi Analisis Multivariate dengan Program SPSS. Semarang: Badan Penerbit Universitas Diponegoro.», 2008.

M. H. Ibrahim, K. Salim, M. Abojeib, e L. W. Yeap, «Structural changes, competition and bank stability in Malaysia’s dual banking system», Econ. Syst., vol. 43, fasc. 1, pp. 111–129, 2019, doi: 10.1016/j.ecosys.2018.09.001.

L. Nugroho, A. Badawi, N. Hidayah, e N. H. Ahmad, «Snapshot in Customer Deposit of Islamic Bank Religion, Age, and Gender as The Reflection of Pancasila Five Principles of Indonesia Nation», J. Res. Bus., vol. 5, fasc. 1, pp. 74–95, 2020, doi: 10.35333/JRB.2020.177.

G. Zouari e M. Abdelhedi, «Customer satisfaction in the digital era: evidence from Islamic banking», J. Innov. Entrep., vol. 10, fasc. 1, 2021, doi: 10.1186/s13731-021-00151-x.

F. Maad, S. Sumardjo, A. Saleh, e P. Muljono, «The Autonomous Development Strategies of Micro and Small Entrepreneurs Through Coorporate Social Responsibility in Bogor District of West Java», Int. J. Sci. Eng., vol. 7, fasc. 1, pp. 70–76, 2014, doi: 10.12777/ijse.7.1.70-76.

L. Nugroho, «Kemandirian UMKM dan Kemandirian Ekonomi Bangsa», in Indonesia Maju dan Bangkit, 1a ed., Pasuruan, Jawa Timur, 2020, pp. 1–11.

Y. Herliansyah, L. Nugroho, D. Ardilla, e Y. M. Putra, «The Determinants of Micro , Small and Medium Enterpreneur (MSME) Become Customer of Islamic Banks (Religion, Religiousity and Location of Islamic Banks)», in The 1st Annual Conference Economics, Business, and Social Sciences, 2020, pp. 1–10. doi: 10.4108/eai.26-3-2019.2290775.

R. Suprapty et al., Perbankan: Hasil pemikiran dari Para Dosen Berbagai Perguruan Tinggi di Indonesia, Second., fasc. April. Sumatera Utara: Sihsawit Labuhan Batu, 2021.

P. Sahlberg, «Rethinking accountability in a knowledge society», J. Educ. Change, vol. 11, fasc. 1, pp. 45–61, 2010, doi: 10.1007/s10833-008-9098-2.

M. F. Dulaimi, M. P. Nepal, e M. Park, «A hierarchical structural model of assessing innovation and project performance», Constr. Manag. Econ., vol. 23, fasc. 6, pp. 565–577, 2005, doi: 10.1080/01446190500126684.

How to Cite
Nugroho, L., Miglietta, F., Nugraha, E., & Soekapdjo, S. (2022). The Determinants Factors of Islamic Bank Profitability (Indonesia Empirical Cases). European Journal of Islamic Finance, 9(3), 38-46.