A Relation between Financing Shariah Product and Asset Quality an Evidence from Indonesia

Abstract

Asset quality represented through non-performing finance can also be affected by financing products owned by Islamic banking. By performing regression analysis on 4 Islamic banks in the period 2012-2020, it was found that each financing product has an effect on non-performing finance. Murabaha had a negative and significant effect on non-performing finance, Ijarah had a positive and significant effect on non-performing finance, Mudharaba and Musharaka had a positive and significant effect on non-performing finance.

Beyond the Crisis: Tracking SME Non-Performing Loan in Indonesia Before and After the COVID-19 Stimulus

“…Studies have explored the impact of financing diversification and the determinants of non-performing financing in Islamic banks, highlighting the importance of efficient operations and risk management practices ( (Lantara et al, 2022) (Mansour et al, 2021) (Ariani et al, 2022). Furthermore, the COVID-19 pandemic has underscored the importance of sound asset quality and operational efficiency in Islamic banking, particularly in the context of supporting Small-Medium Enterprises (SMEs) and navigating economic shocks ( (Alzoubi & Obeidat, 2020) (Pratiwi, 2023) (Fakhrunnas & Hasanah, 2022). The pandemic has also influenced the financial performance of Islamic banks, necessitating a comprehensive understanding of the factors affecting non-performing financing and the stability of banking operations (Canggih et al, 2022).…”