The effect of loan-loss provision, non-performing loans and third-party fund on capital adequacy ratio

Nugroho, Mulyanto; Arif, Donny; Halik, Abdul

doi:10.5267/j.ac.2021.1.013

Cited by 15 publications

(7 citation statements)

References 1 publication

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“…The existence of profit and loss sharing with customers during the COVID-19 pandemic has a positive impact on Islamic banking (Brastama & Yadnya, 2020;Hastasari & Suharini, 2021). Meanwhile, there is no profit or loss sharing in conventional, which can cause losses (Jannah, Fitrijanti, & Adrianto, 2020;Nugroho, Arif, & Halik, 2021;Purnamasari & Ramayanti, 2020). Effendi and Hariani (2020) also Sovia, Saifi, and Husaini (2016) found a significant difference in non-performing loans (NPL)/non-performing financing (NPF) between Islamic and conventional banking.…”

Section: Islamic and Conventional Bankingmentioning

confidence: 99%

A Comparative Study on Financial Performance between Islamic and Conventional Banking in Indonesia During the COVID-19 Pandemic

et al. 2022

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The COVID-19 pandemic has had an impact on all aspects of life, including Indonesian banking. Furthermore, there has been a rapid growth of both Islamic and conventional banking industries. Therefore, this study aims to analyze the diﬀerences in the ﬁnancial ratios of capital adequacy ratio, non-performing loans/non-performing ﬁnancing, return on asset, return on equity, operating expense to operating income, as well as loan to deposit ratio/ﬁnancing todeposit ratio of Islamic and conventional banking during the COVID-19 pandemic. Acomparative analysis method was used with a quantitative approach, and data analysis was carried out using the independent sample t-test and the Mann-Whitney rank test. The results showed that during the COVID-19 pandemic, there were signiﬁcant diﬀerences in the ﬁnancial performance ratios of capital adequacy ratio, non-performing loans/non-performing ﬁnancing, return on asset, return on equity, operating expense to operating income, and loan to deposit ratio/ﬁnancing to deposit ratio for both Islamic and conventional banking. Moreover, conventional banking tends to have better ﬁnancial performance compared to Islamic bankingduring the COVID-19 pandemic. The implication of this study is that the public can ﬁnd out the ﬁnancial position of both Islamic and conventional banks and make comparisons to ascertain which one has a better ﬁnancial position in times of crisis.

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Section: Islamic and Conventional Bankingmentioning

confidence: 99%

A Comparative Study on Financial Performance between Islamic and Conventional Banking in Indonesia During the COVID-19 Pandemic

et al. 2022

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“…The ratio of provision for loan loss to total loans was used (Widarjono et al , 2020). AQ has a linkage to the capital since an increase in loan-loss provision could affect the capital of IBs (Nugroho et al , 2021). We utilized management efficiency ( ME ) as a measure of operating competency of IBs using the operating expenses to assets ratio (Ibrahim, 2020).…”

Section: Methodsmentioning

confidence: 99%

CAMELS, risk-sharing financing, institutional quality and stability of Islamic banks: evidence from 6 OIC countries

Danlami

Abduh

Razak

2022

JIABR

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Purpose This study aims to examine the nexus between CAMELS, risk-sharing financial performance and Islamic banks' stability. It also attempts to assess the conditioning effects of institutional quality in the relationship between risk-sharing contracts and the stability of Islamic banks. Design/methodology/approach The quantitative research design was employed using secondary data from 20 Islamic banks in six countries over the period 2007–2019. The study utilized the feasible generalized least squares method for the analysis. Findings The results indicate that not all CAMELS variables support the stability of Islamic banks. The musharakah contract induced stability of the banks, whereas mudarabah financing reduced it. The interaction between risk-sharing finance and the quality of institutions suggested that the mudarabah contract via institutional quality raises the stability of Islamic banks. On the other hand, the quality of institutions encourages the banks to offer more musharakah, but it leads to an increase in their risk-taking. We show the impact of changes in risk-sharing variables on stability amplified by institutional quality. The results were robust when alternative measures of stability were used. Practical implications Various stakeholders in banking activities could learn from the results of this study. Islamic banks could improve their positions in terms of screening for risk-sharing financing. They could also leverage more on musharakah, as it promotes stability and could generate more returns for the banks. The mudarabah financing can be improved if there is a proper evaluation of entrepreneurs. Policymakers would learn more about the importance of institutional quality, as it provides a friendly environment for both mudarabah and musharakah businesses to thrive. This could increase the participation of Islamic banks in the real economy. Originality/value Previous studies concentrated on the effects of CAMELS on the profitability of Islamic banks. This study shows that CAMELS alone might not necessarily capture the financial performance of Islamic banks. Therefore, the risk-sharing financing variables are included alongside CAMELS to determine their effects on stability. Second, unlike the past research, this study used the quality of institutions to moderate the nexus between risk-sharing financing and the stability of Islamic banks.

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“…Rasio ROE juga digunakan sebagai pengukur kinerja dari perusahaan (Malina et al, 2020;Naknok, 2022) dengan menunjukan seberapa efisien sebuah perusahaan dalam utilisasi modal yang dimiliki perusahaan (Pointer & Khoi, 2019). Non-performing Loans (NPL) menjadi salah satu determinan untuk menentukan tingkat kredit bermasalah pada perusahaan perbankan (Nugroho et al, 2021) dan menjadi salah satu faktor yang mempengaruhi profitabilitas perbankan dengan hubungan yang negatif (Trofimov et al, 2018). Pada sisi lain, tingkat kredit bermasalah pada perbankan syariah direpresentasikan dengan non-performing financing (NPF) (Effendi et al, 2017).…”

Section: Telaah Literaturunclassified

Analisis Komparatif Bank Syariah Dan Bank Konvensional Pada Masa Resesi Global COVID-19

Yulfiswandi²,

Junita³

et al. 2023

JBM

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The popularity of islamic bank has been increasing on countries with Muslims as majority of their population where Muslim consumers could fulfil their banking needs while still complying to their religious rules. Development of islamic banks started from the establishment of Bank Muamalat as the first islamic bank established in Indonesia around 1991. Few studies has shown that islamic banks in Indonesia has better robustness than conventional banks during the 1998 economic crisis. In order to verify that statement, an updated study is required with the latest data and current economic situations. Indonesia has been impacted by the COVID-19 pandemic in which yearly GDP of Indonesia shown a negative growth as the recession status has been attained in the 2nd quarter of 2020. This study is done by comparing islamic banks as well as conventional banks’ fundamentals before and during the pandemic era. It is found that islamic banks is better in overcoming economic crisis than conventional banks. Keywords: Islamic banks, conventional banks, recession, COVID-19

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The effect of loan-loss provision, non-performing loans and third-party fund on capital adequacy ratio

Cited by 15 publications

References 1 publication

A Comparative Study on Financial Performance between Islamic and Conventional Banking in Indonesia During the COVID-19 Pandemic

A Comparative Study on Financial Performance between Islamic and Conventional Banking in Indonesia During the COVID-19 Pandemic

CAMELS, risk-sharing financing, institutional quality and stability of Islamic banks: evidence from 6 OIC countries

Analisis Komparatif Bank Syariah Dan Bank Konvensional Pada Masa Resesi Global COVID-19

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