Management ownership and the performance of Islamic microfinance institutions: a panel data analysis of Indonesian Islamic rural banks

Abstract

Purpose This study aims to analyse the relationship between management ownership and the performance of Islamic microfinance institutions (MFIs) using panel data from Indonesian Islamic rural banks (Bank Pembiayaan Rakyat Syariah [BPRS]). Design/methodology/approach This study uses unbalanced quarterly panel data from BPRS during the period from 2011 to 2016. Performance, as the dependent variable in this study, is analysed based on three sets of measures, namely, profitability, efficiency and the financing risk. Management ownership, as the independent variable in this study, is represented by ownership by the board of directors (BOD), the board of commissioners (BOC) and the sharia supervisory boards (SSB). Findings The results show that ownership by the BOD and BOC does not have a significant relationship with profitability and efficiency. However, the BOD ownership has a negative relationship with the financing risk and vice versa for the BOC ownership. Additionally, the study reveals that ownership by the SSB plays a positive and significant role in increasing the profitability and efficiency but does not have a significant impact on the financing risk. Originality/value This is one of the first studies to provide empirical results regarding the relationship between management (BOD, BOC and SSB) ownership and the performance of BPRS. The finding reveals that ownership by the SSB is very important to increase the profitability and efficiency of the BPRS. Contribution to Impact This study fills the gap in the literature about Islamic MFIs in Indonesia, especially the BPRS. This research also provides an insight into corporate governance practices and Islamic MFIs’ performance using BPRS data. The findings provide useful information for policy makers and regulators.

Pengaruh Jumlah Pembiayaan, Pendapatan Nasabah, dan Jangka Waktu Pengembalian Terhadap Kelancaran Pembiayaan Nasabah BPRS Carana Kiat Andalas Bukittinggi

“…Kolektabilitas pembiayaan adalah kemampuan anggota dalam mengembalikan dana pembiayaan dari bank syariah dinyatakan lancar atau tidak, baik pinjaman pokok maupun bagi hasil pada waktu yang telah disebutkan berdasarkan perjanjian yang telah disepakati [17]. Kolektabilitas pembiayaan dapat diukur melalui ketepatan mengembalikan angsuran pokok dan bagi hasil serta kemampuan anggota, dilihat dari usaha maupun nilai agunan yang bersangkutan [18].…”

Objectives and measures of performance of Islamic microfinance banks in Indonesia: the stakeholders' perspectives

“…Most of the measures of financial performance used in previous empirical literature on IMFIs are return on assets (ROA) and operational self-sufficiency, while the depth of outreach is used to measure social performance. For example, Fithria et al (2021) assess IMFBs' performance in Indonesia based on the measures of profitability (ROA), operational efficiency and financing risk. The main social performance measures used in many empirical studies are average loan size (relative to the income of the target population), number of borrowers, number of loans and savings accounts, number of branches established and lending (not only to women, but also to the family as a whole) (Abdelkader and Salem, 2013; Kamaluddin and Kasim, 2013; Mahmood et al , 2014; Farooq and Khan, 2014; Mobin et al , 2015; Widiarto and Emrouznejad, 2015; Fersi and Boujelbéne, 2016; Ibrahim et al , 2016; Hassan and Saleem, 2017; Berguiga et al , 2020).…”

Conversion of Convensitonal Cooperatives to Improve the Islamic Economic

“…The development of the national economy is not only supported by banking financial institutions, but also by sharia microfinance institutions (Fithria et al, 2021), one of the pillars of the country's economy, especially those in contact with the lower class economic community (Jamaluddin & Abdullah, 2019;Pahlevi et al, 2022). Recently, the Indonesian government has been promoting the MSME economy by collaborating with Sharia Cooperatives (Syarifuddin et al, 2021), the government encourages how conventional cooperatives transform into sharia cooperatives (Nasfi et al, 2022), where the opportunities for transformation into sharia cooperatives are greater, moreover driven by the majority Muslim community (Riwajanti, 2019).…”