This study examines the dynamic relationship between the Indonesian Sharia Stock Index and selected macroeconomic variables using the autoregressive distributed lag approach combined with the error correction model. The analysis incorporates policy interest rates, interbank rates, exchange rates, inflation, and the Indonesia Composite Index as explanatory factors. The results of the bounds testing procedure indicate the absence of a long-run cointegrating relationship between the Islamic stock index and the included macroeconomic variables. This finding suggests that the Islamic equity market in Indonesia does not follow a stable equilibrium path determined by conventional macroeconomic fundamentals. In the short run, the analysis reveals that monetary policy exerts delayed and complex effects, while the exchange rate shows little influence on the Islamic stock index. The Indonesia Composite Index emerges as the most significant driver, highlighting the importance of overall market sentiment and domestic equity performance in shaping the dynamics of sharia-compliant stocks. Interestingly, inflation and the interbank rate, although initially included in the model, were excluded in the final estimation due to their lack of measurable impact within the study period. These findings emphasize that the Indonesian Sharia Stock Index is largely influenced by short-term market fluctuations and domestic equity conditions, rather than by long-run macroeconomic fundamentals
This research examines the impact of Islamic finance on Indonesia’s economic growth. Using quarterly time series data on Islamic banking, Islamic mutual funds, Islamic pawnshops, Zakat, Infaq, and Shadaqah (ZIS) from 2014 to 2022 (36 observations), and applying the Error Correction Model (ECM), the study evaluates both short- and long-term effects. The results show that, in the short term, only Islamic banking financing has a significant positive effect, while Islamic mutual funds, Islamic pawnshops, and ZIS are not significant. In the long term, Islamic banking, Islamic pawnshops, and ZIS contribute positively and significantly to economic growth. These findings support financial intermediation and Islamic social finance theory, indicating that Islamic financial institutions channel funds into the economy, with effects that vary over time. They also highlight the role of Islamic finance in promoting financial inclusion, supporting micro and small enterprises, and improving welfare through income redistribution. This study suggests that policymakers should reinforce the regulatory framework for Islamic finance. Despite its lack of short-term significance, their long-term benefits underscore the necessity for policies to facilitate their growth and integration into the broader financial system.
Sumatra Island is one of the main targets in the development of Islamic economics and finance. This development is expected to bring significant impacts on socio-economy. Therefore, this study aims to examine the relationship between Islamic financial inclusion and human development index (HDI) in Sumatra Island, Indonesia. The study procedures were carried out using panel data on Islamic financial inclusion from 10 provinces from 2015 - 2022. Data was then analyzed using regression analysis and processed with Stata software. The results showed that there was a positive and significant relationship between financial inclusion index and HDI. To provide a broader impact on human development, it was necessary to increase Islamic financial inclusion in Sumatra Island. Therefore, bank managers must provide access to the unbanked community by opening wider and easier banking services for the unbanked. This study also provided recommendations for strategies to accelerate formal Islamic financial inclusion in Sumatra Island.
This study aimed to establish a philosophical foundation for the conventional financial system from an Islamic perspective, with particular emphasis on usury and risk rationality in the global finance landscape. Using a qualitative library investigative approach, primary data were obtained from articles and books, while secondary data were sourced from financial reports published by various institutions, particularly the Financial Services Authority (OJK). The results showed a positive correlation between the expansion of the interest-based financial sector and rising economic inequality. Conversely, risk-sharing instruments, such as profit-sharing, in Islamic financial institutions presented greater stability in the face of economic shocks and crises. The analysis also identified gaps between philosophical criticism and the practical implementation of contemporary Islamic finance, as well as between the returns on Islamic products and conventional interest rates. In conclusion, ethical and spiritual dimensions should be included in economic theory, as outlined in the Maqâsid al-Sharî’ah. A limitation of this study was the lack of in-depth philosophical analysis grounded in authoritative sources
Despite extensive literature on external debt and economic growth, the fiscal burden of multilateral debt service and its interaction with Islamic governance principles and multilateral development bank alignment remain empirically underexplored among Organization of Islamic Cooperation member states. This study examines the impact of multilateral debt service on GDP per capita growth across twelve OIC Asia-Pacific member states over 1996 to 2022, focusing on the moderating roles of governance quality, infrastructure investment, technological advancement, and Islamicity Index adherence. Applying System Generalised Method of Moments on an unbalanced panel of 312 country-year observations, results confirm a marginally significant negative short-run effect on growth through productive investment crowding out, with the long-run effect remaining negative and persistent. Infrastructure investment and technological advancement significantly mitigate these effects, while the Islamicity Index produces a marginally significant negative moderatingeffect in both horizons, reflecting structural constraints imposed by the prohibition of riba on conventional debt financing. New Asian Model banks demonstrate the most consistently positive growth outcomes, whereas Islamic-principled banks face persistent challenges reconciling debt obligations with Shariah requirements. These findings call for strategic integration of Shariah-compliant financing instruments, differentiated multilateral development bank engagement, and governance capacity investment across OIC member states
This research analyzes the influence of bank fundamentals, bank size, location, and macroeconomic variables on the profitability of Sharia Rural Banks (SRBs) in Indonesia. Our study investigates 90 banks located on the island of Java. The research period is 2018-2021, using quarterly data. The dynamic panel regression is employed with a GMM method. The findings indicate that strong bank fundamentals, as indicated by large assets, high CAR, and high efficiency, have a positive effect on profitability. There are two other interesting findings in this study. First, large SRBs encourage high profitability. Second, locations with high economic growth and high religiosity foster profitability. Some policy implications can be drawn from our findings. First, SRB must have sufficient capital and a high level of efficiency to increase profitability. Second, a large SRB is the best choice for an SRB to have sound financial performance. Third, SBRs must intensively introduce Sharia banking products to the public to increase their performance because religiosity is an important factor in determining profitability.
This study explores the willingness to pay (WTP) for Sharia general insurance in Jabodetabek, Indonesia, where adoption remains low. The objective is to assess how gender, residence, age, education, occupation, and income influence WTP. Using a quantitative approach, data were collected from 250 respondents through a structured questionnaire. The analysis involved descriptive statistics, cross-tabulation, and chi-square tests. Results indicate that gender, age, and income significantly affect WTP, with higher WTP observed among men, older individuals, and those with higher incomes. Conversely, residence, education, and occupation do not significantly impact WTP. The findings suggest that Sharia insurance providers should tailor products and educational efforts to better align with different demographic groups’ financial capabilities and needs. These insights are crucial for enhancing the adoption of Sharia general insurance in the region.
Islamic banking in Indonesia has experienced rapid development, with Islamic Banking Business Units (UUS) offering an alternative Sharia-based financial system known as financing. However, the distribution of financing by Islamic banks remains predominantly consumptive rather than productive, with a direct connection to the real sector, such as investment financing, whose proportion or ratio to total financing disbursed diminishes annually. This study seeks to analyze the impact of internal and external factors on the proportion of investment financing in the UUS, including the Financing to Deposit Ratio (FDR), Investment Financing Margin, Non-Performing Financing (NPF), inflation, Gross Domestic Product (GDP), and the Certificate bonus Bank Indonesia Syariah (SBIS). The data period for this study spans from January 2018 to December 2023. The methodology employed in this study is the Vector Error Correction Model (VECM). The VECM analysis indicates that, in the short term, only the SBIS bonus variable significantly affects the proportion of investment financing. In the long term, GDP, inflation, and SBIS significantly influence the proportion of investment financing. UUS must develop strategies that are adaptive to external variables such as inflation, GDP, and SBIS. Additionally, UUS should promote accelerated growth in FDR and Margin.
This study aims to assess the effect of Islamic Social Reporting (ISR) on the relationship between financial performance and firm value in Indonesian Islamic banks. This study utilizes the Moderated Regression Analysis model, with ISR serving as the moderating variable, financial performance metrics (Financing to Deposit Ratio [FDR], Return on Assets [ROA], and Capital Adequacy Ratio [CAR]) as the independent variables, and firm value (EVA) as the dependent variable. The study focuses on ten Islamic commercial banks in Indonesia from 2017 to 2023 and is based on the analysis of 70 annual financial reports, utilizing Moderated Regression Analysis. The findings indicate that ISR significantly moderates and strengthens the relationship between ROA and EVA. This underscores the critical role of ISR reporting in helping regulators develop a more comprehensive framework and in reinforcing the industry’s adherence to Islamic economic principles. By exploring the nuanced role of ISR in amplifying financial signals like ROA, this study subtly repositions ISR from a mere reporting obligation to a strategic element that deepens the value relevance of Islamic financial disclosures.
The present research aims to analyze how financial metrics reflecting profitability, liquidity, and solvency affect the profit performance of sharia-compliant equities in the healthcare industry amid the COVID-19 pandemic. This investigation employs a panel data regression methodology, utilizing a sample of medical services businesses that are publicly traded on the Indonesia Stock Exchange throughout this time frame from 2020 to 2022. The estimation model applied is the Fixed Effect Model (FEM) using Eviews 13 software. Hypothesis testing is conducted using t-tests and F-tests to ensure the robustness of the results. The findings reveal that simultaneously, ROA, ROE, EPS, NPM, CR, and DER have a significant effect on the return of sharia healthcare stocks. Partially, the results of this study show that EPS, CR, and DER have a significant effect on the return of sharia healthcare stocks. ROA, ROE, and NPM metrics had no substantial statistical implications. Theoretically, this study enriches the Islamic financial literature by showing that some financial ratios can affect Islamic stocks differently than conventional stocks during crises. In practical terms, these findings provide valuable insights for financial professionals to refine investment strategies, particularly in the healthcare sector during market volatility.
This study aims to analyze the performance of Islamic Commercial Banks (ICB) and Islamic Banking Units (IBU) in Indonesia in 2021-2023 based on the Sharia Maqasid Index (SMI) and Simple Additive Weighting Rating (SAWR). Assessment of the performance of ICB and IBU in the Annual Report so far is only based on financial ratios, so it cannot evaluate the basic principles of Islamic banks. Therefore, the SMI and SAWR approaches are used to measure the performance of Islamic banks. The object of this research is 13 ICB and 20 IBU registered with OJK (Financial Services Authority). The results showed that the highest total score was Bank Mega Syariah (BMS) in 2021, Bank Panin Dubai Syariah (BPDS) in 2022 and 2023, IBU BPD Nagari (Sumatra Barat) in 2021 and 2023, and IBU BPD Jawa Timur in 2022. Each ICB and IBU has generally been able to carry out all of its objectives, namely Tahdzib al-fard (educating individuals), Iqamah al-adl (upholding justice), and Jabl al-Maslahah (Creating welfare). This research provides implications for further evaluation and development regarding the appropriate performance assessment of ICB and IBU and the following Sharia principles prioritizing the benefit of the people
This research empirically tests the influence of women’s presence on the board of directors, Corporate Social Responsibility (CSR) expenditure, and capital structure on the likelihood of financial distress for a sample of 13 Islamic commercial banks in Indonesia from 2019 to 2022. The study employs regression to determine the impact of board gender diversity on financial distress. Altman Z-score model is used as a proxy for financial distress indicator. The result shows that the presence of female director can enhance the possibility of financial distress due to their excessive caution. In addition, CSR can also lead to financial difficulties for the entities because CSR implementations need substantial funding, and undue reliance on debt can also increase the risk of financial problems. These findings have significant implications for governance and risk management in Islamic commercial banks. They stress the need for a balanced approach to board gender diversity, avoiding excessive caution that could lead to financial strain. Banks should align CSR activities with their financial capacity to prevent undue burden and manage debt levels prudently to reduce financial distress. These insights can help policymakers and institutions improve governance, CSR strategies, and financial risk management, enhancing the stability of Islamic commercial banks.
Baitul Maal wat Tamwil (BMT) is vital in developing Micro, Small, and Medium Enterprises (MSMEs). This paper examines the benefits of BMT for members regarding accessibility, product expertise, and service quality. This study was designed with quantitative methods using a survey by distributing questionnaires to 200 respondents gathered from five branch offices of BMT Bahtera, Pekalongan, Indonesia. This study employed path analysis to analyze the data. The study results demonstrate that accessibility, product expertise, and service quality significantly impacted consumer welfare. This result indicates that customer welfare is the primary factor in the growth of BMTs. Conversely, accessibility, product expertise, and service quality were significant for BMT growth and members’ welfare. This research contributes to BMT product quality improvement and ease of access to customer services by using technology to create effectiveness and efficiency.
This study explores the concept and practice of sovereign sukūk issuances managed by the Government of Indonesia as an instrument to finance the state budget deficit in Indonesia. The government has been forced to employ a budget deficit policy to fund the vast country’s spending. To finance the deficit, the government uses sovereign sukūk (named Sukūk Negara) as one of the financial instruments in addition to sovereign bonds (called Surat Utang Negara). The study uses a qualitative method with library study and interviews as the data collection techniques. The finding shows that the government has developed four models of sovereign sukuk structure, named Ijārah Sale and Leased Back, Ijārah al-Khadamat, Ijārah Asset to be Leased, and Wakālah; with the crux of the four models is Ijārah Sukūk which combines two central Islamic contracts, i.e. sale and purchase contract (al-Bayʿ) and lease contract (al-Ijārah). The sale and purchase of state-owned assets in Indonesian sovereign sukūk issuance is limited to the beneficial right of the asset only (excluding the legal title of the asset). Likewise, the study positively contributes to the two fields, i.e., academic research and the finance industry (particularly Islamic finance involving government and private investors).
This study aims to obtain empirical evidence on the effects of environmental, social, and governance (ESG) on the profitability performance of Islamic companies, incorporating the moderating effect of financial slack in this relationship. The sample includes Islamic companies listed on the Jakarta Islamic Index 70 (JII 70) and the SRI KEHATI index over the 2021-2023 period, resulting in 129 firm-year observations. Panel data analysis using Eviews 13 software identified the Random Effect Model as the best approach. Findings indicate that ESG practices significantly affect profitability, supporting agency theory by suggesting that management may engage in ESG activities that incur costs without clear financial benefits for shareholders. Financial slack does not moderate the ESG-profitability relationship. Instead, financial slack, proxied by the cash ratio, directly impacts profitability. These findings suggest that while ESG practices may have profitability trade-offs, financial flexibility could enhance profit potential in Islamic companies. For policymakers, these results underscore the need to tailor ESG frameworks to the unique financial dynamics of Islamic companies, potentially aiding these firms in achieving both sustainable and profitable growth.
As the latest player in the banking market in Indonesia, Islamic banks are not as experienced as their counterpart conventional banks. In addition, the types of Islamic bank financing (loans) are different from conventional bank loans. Our work investigates the determinants of Islamic bank financing in Indonesia. Our concern variables are market concentration, bank fundamentals, and macroeconomic conditions, including Covid-19. This study examines all Islamic banks in Indonesia from 2015 to 2020 using quarterly data. Our data set is 724 observations with unbalanced panel data. We employ the dynamic panel data using the two-step system GMM that is more robust than two-step difference GMM. Market concentration encourages financing. Profitability, bank size, and financing loss provision also enhance financing. However, a high degree of risk aversion and inefficiency reduces financing. Furthermore, Islamic bank financing also depends on macroeconomic conditions. Economic upturns strengthen financing. Strong bank fundamentals, particularly bank size, are the key to success for Islamic bank financing. The results draw an important practical implication. Large Islamic bank is a necessary condition to compete with a conventional bank. Accordingly, the spin off policy of Islamic bank windows to full-fledged Islamic bank should be implemented immediately.
Mergers and acquisitions (MA) in Islamic banking in Indonesia can be viewed from the strategic interests of each bank. This research aims to examine the patterns of MA in Bank Syariah Indonesia (BSI) and Bank Victoria Syariah in Indonesia. It also discusses the positive and negative implications of the MA of these two banks, as seen in the developments before and after the MA. This research employs BOCR (Benefit, Opportunity, Cost, and Risk) analysis to assess the extent to which MA patterns occur in the merger outcomes at BSI. It also utilizes CAMEL (Capital Asset Earnings and Liquidity) analysis to evaluate the post-acquisition banking health at Bank Victoria Syariah. The research descriptively explains the MA conditions in these two Islamic banks in Indonesia and the impact of MA on the banks, employees, customers, and the general public. The study results indicate that themerger of three state-owned Islamic banking companies, namely Bank Syariah Mandiri, BRI Syariah, and BNI Syariah, into BSI was carried out not only to expand the market share of Islamic banking but also due to cost considerations. At the same time, the acquisition of Bank Victoria Syariah was made due to capital needs as required by the regulator.
The investigation of economic policy uncertainty (EPU) was necessary during financial and trade integration between countries. In this context, there was a spillover effect of global economic policy protections impacting stock markets. Therefore, this research aimed to determine the effect of global policy proxied by the United States, China, and Japan on Islamic stock market in Indonesia. Macroeconomic indicators were also included in the research model and the time series data was obtained from January 2015 to December 2022. In addition, Vector Error Correction Model (VECM) was used as an analytical method in the model. The results showed that Islamic stocks responded positively to global economic policy, exchange rates, and exports to stock index, while inflation reported a negative response.
This study was conducted to offer an assessment of the qard factors, concerning Indonesian Islamic Rural Banks. To conduct this analysis, data from Indonesian Rural Banks and macroeconomic panels were used. In addition, an approximated generalized method of the moment was also used to report qard determinants from 2012-2022. The results showed that Return on Assets (ROA), Bank Operational Costs to Operating Income (BOPO), and inflation negatively impacted the distribution of qard, while Non-Performing Financing (NPF) variable indicated a positive and significant impact. Valuable recommendations were formulated by comprehending the interplay between profitability ratios and macroeconomic conditions. These recommendations informed the development of products within the context of BPRS and Sharia banking, contributing to rural economic growth through qard financing. This study developed BPRS and Sharia banking products to increase rural economic growth. Qard financing served as an essential resource for individuals who did not meet the eligibility criteria of conventional banks. The adoption and expansion also promoted financial inclusion for marginalized communities.
This study examines the impact of Islamic board characteristics (SB) and macroeconomic factors on the Non-performing financing (NPF) of Islamic commercial banks (ICB). The sample of this study consisted of 14 ICBs in Indonesia from 2010 to 2021. In this study, data estimation used a one-step GMM System model. SB features such as SB Size and SB Woman were found to have a detrimental impact on NPF. GDP per capita, for example, negatively affects NPF, while inflation has a positive impact. However, this study could not show the impact of SB characteristics such as expertise and proximity of SB to NPF. The study also found that macroeconomic factors such as annual open unemployment and interest rates showed an insignificant negative influence on NFP. The findings of this study help regulators, investors, and management of Islamic banks better understand the impact of SB characteristics and macroeconomic factors on Non-performing financing (NPF) of Islamic banks, especially in the context of ICB in Indonesia. In addition, it is expected to inspire similar research in the future.
