Long Term Impact Profitability of Market Share Islamic Bank in Indonesia

Abstract

Market share is one of the indicators used by Islamic banking to measure how much it contributes to the banking industry in Indonesia. However, until now the market share of Islamic banks in Indonesia is still very small. So it becomes important to examine variables that can increase market share in Indonesia. This study uses the internal variables of Islamic banks, namely Return On Assets, Capital Adequacy Ratio, Financing to Deposit Ratio, and Non Performing Financing. Analysis of the influence of internal variables on Islamic banks with market share is measured using long-term regression, namely the fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) regressions. Based on the results of the regression, it shows that the profitability variable proxied by the Return On Assets variable and the Financing to deposit Ratio variable has a positive effect on the market share of Islamic banks in Indonesia. The Capital Adequacy Ratio and Non-Performing Financing variables reject the proposed hypothesis. These results have implications for the practice of Islamic banking in Indonesia where if you want to increase market share, you have to increase profitability by increasing the quality of the financing that is distributed.