Determinant of Islamic Bank Performance and Bank Risk (study in central java periode 2019-2024)

Abstract

This purposes of study is to analyze the effect of specific factors of Islamic banking on the performance of Islamic Rural Credit Banks (BPRS) in Central Java Province in the period 2019-2023. The factors studied include Capital Adequacy Ratio (CAR), Non Performing Financing (NPF), Operating Costs to Operating Income (BOPO), and Financing to Deposit Ratio (FDR). This study uses secondary data obtained from the annual financial reports of BPRS published by the Financial Services Authority (OJK). The population in this study was BPRS throughout Central Java, totaling 27 BPRS. However, there were 4 BPRS whose financial reports were incomplete, so the final sample in this study was 23 BPRS with a period of 5 years. Thus, the number of observations in this study was 115 observations. The analysis method used was multiple linear regression for hypothesis testing, and a classical assumption test was carried out to ensure that the model formed was not biased. The results of the study indicate that CAR and FDR do not have a significant effect on the profitability of BPRS in Central Java, while NPF and BOPO are proven to have a negative effect on the profitability of BPRS in Central Java. This means that carrying out cost efficiency and carrying out strict control over the level of bad debts is very important for BPRS management in order to record a profit. This study contributes to BPRS management to improve performance by paying attention to these ratios, especially in facing post-Covid-19 pandemic conditions.

Keywords: Profitablity, Islamic Rural Bank, Capital Adequacy Ratio, Non Performing Financing, Operating Costs to Operating Income, Financing to Deposit Ratio.