Financial performance as a measuring instrument to know the process of implementing financial resources owned by the company. The Covid-19 pandemic has impacted the banking sector, resulting in poor financing due to debtors' disbursements as a result of the large number of people losing their jobs and difficulties in financing payments. This research aims to analyze the financial performance of Islamic Banks during the Covid-19 pandemic, using records of annual financial statements from 2011 to 2020 through Multiple Linear Regression testing and linearity testing of the model used Ramsey test. As a result of this study, the results of the t test found that the Capital Adequacy Ratio (CAR), Operating Costs to Operating Income (BOPO), Financing to Deposit Ratio (FDR) had a positive and significant effect on financial performance (ROA) while Not Performing Financing (NPF) had a negative and insignificant effect on financial performance (ROA). Furthermore, simultaneously capital adequacy ratio (CAR), Operating Costs to Operating Income (BOPO), Financing to Deposit Ratio (FDR) and Not Performing Financing (NPF) significantly influenced the financial performance (ROA) of Sharia banks in Indonesia

By reading this book, you might understand liquidity management, risk management and deposit characteristics of Islamic banks. Also, you will have a better understanding on Islamic monetary operations in case of Indonesia and from theoretical perspective.

Islamic banking and finance has shown progressive development all over the world since its inception as a commercial banking model in mid-1970s. Indonesia, as the largest Moslem nation in the world, has initiated some policies to expand the Islamic banking industry in the country. Similar to conventional banks, Islamic banks face a number of risk areas, which may affect their performance and operations. One of such risk areas is liquidity risk, which shows additional features in the case of Islamic banks. Both the international banking standards and the Sharia guidance suggest that banks should have: robust liquidity risk management policies, a responsive asset and liability committee, effective information and internal control systems and, methods for managing deposits to reduce on-demand liquidity, to manage liquidity risk. The aim of this research, hence, is to analyze the management of liquidity risk in Islamic banks through balancing assets and liabilities with the ultimate objective to recommend policies to improve the management of liquidity risk. This aim is fulfilled in the case of Indonesian Islamic banking industry. The data collection and analysis method in this research involve triangulation method with a combination of quantitative and qualitative methods to achieve such aim and objective. Particularly, both the performance analysis of the industry and the econometric time series analysis were conducted to analyze the liquidity risk and its management for Islamic banking, which includes the liquidity behavior of banking depositors and Islamic banks. In addition, the primary data through questionnaire survey was also assembled with the aim of knowing the actual practices and problems of managing liquidity risk. It was investigated from the perceptions of Islamic banking depositors and Islamic bankers to shed further lights on the liquidity risk issues, which were not captured in the time-series analysis. The empirical analyses conducted in this research demonstrate: (i) the non optimal organizational structure of Islamic banks to manage liquidity, (ii) the significant demand for liquidity withdrawals from depositors and fragility of Islamic banks to mitigate certain scenarios of liquidity withdrawals, (iii) critical factors explaining liquidity behavior of banking depositors and Islamic banks, (iv) reasons for depositors to withdraw funds from Islamic banks and the non ideal management of funds by Islamic banks and, (v) the limited Islamic money market instruments to manage the demand for liquidity from depositors. Based on these findings, the research then constructs an integrated and comprehensive program to manage liquidity risk, which consists of three elements: (i) institutional deepening, (ii) restructuring the management of liquidity on the asset and liability sides and, (iii) revitalizing the usage of Islamic liquid instruments. This integrated and comprehensive program of liquidity risk management recommends a better way of managing liquidity risk based on Sharia compliant instruments and international standard banking practices.

A comprehensive overview of key developments in Islamic banking In Islamic Banking in Indonesia, renowned economist Dr. Rifki Ismal explores current issues in Islamic banking and financial products with a particular focus on the danger of liquidity risk in Indonesia. It approaches liquidity risk from the conventional perspective of international banking standards, as well as from the Islamic banking perspective. Dr. Ismal also covers the issues of asset-liability balancing, liquidity risk index, organizational structures for managing liquidity, industrial analysis, withdrawal risk, bankruptcy risk, moral hazard risk, and market risk. Compiling all the latest academic research on liquidity risk and other risks in Islamic banking, the book provides a theoretical foundation for managing risk that will is highly useful for researchers on Islamic banking and practitioners and academics. Written by a renowned expert on Islamic banking who works on monetary policy at the central bank of Indonesia Covers the latest developments in Islamic banking, particularly liquidity risk, for a rapidly expanding market Ideal for European and American readers, in addition to Asian readers, who need a fuller understanding of Islamic banking institutions, markets, and products With the latest academic research and the expertise of a leading practitioner in Islamic banking, this book offers in-depth coverage of the most pressing issues in the field.

The new government regulation on Islamic finance sector has contributed to the growth of Islamic banking in Indonesia. However, the higher demand of financing in Islamic banking business activities not followed by the good growth of funding. This condition, may cause liquidity problem in the future. Furthermore, Islamic bank need to diversify the allocation of funding sources to liquidity instruments such sovereign Sukuk (SBSN) at the right time in order to reduce liquidity risk. This paper aims to analyze the effects of assets and liabilities on sovereign Sukuk (SBSN) based on model Autoregresif Distributed-Lag (ARDL) for Islamic Bank. The data for Islamic Bank collected from The Financial Services Authority of Indonesia (OJK), and sovereign sukuk data collected from Directorate General of Budget Financing and Risk Management Ministry of Finance (DJPPR). Assets and liabilities determinants factors like, third parties fund / DPK (saving and current account), Musharakah,Murabahah, Cash, deposits account owned by Islamic Bank in Central Bank (giro BI), Islamic Securities owned by Islamic bank, and previous period of sovereign sukuk ownership. In general, results of this study shows that the effects of assets and liabilities on sovereign Sukuk (SBSN) influence significanly positif by third parties fund / DPK (saving and current account), Musharakah Financing, and previous period of sovereign sukuk ownership. Whereas influence significantly negative by Cash, deposits account owned by Islamic Bank in Central Bank (giro BI), Islamic Securities owned by Islamic bank, and Murabahah Financing.

Purpose – This paper aims to examine the effect of management accounting–strategy coalignment on the maqasid Shariah-based performance of Islamic banks in Indonesia. The study also examines the role of the corporate life cycle of Islamic banks in influencing the relationship between management accounting– strategy coalignment and performance. Design/methodology/approach – Management accounting practices, management control systems, strategy and maqasid Shariah-based performance are measured using questionnaires which were distributed to 97 directors and heads of Islamic banks. The model of this study is analyzed using structural equation model. Findings – This study finds that the coalignment between low cost-oriented strategy, strategic management accounting practices and mechanistic management control system has positive impact on improving maqasid Shariah-based performance. However, this study is unable to verify that corporate life cycle strengthens the positive relationship between management accounting–strategy coalignment and performance. Research limitations/implications – Limited indicators of management accounting practices in this study illustrate less comprehensive management accounting practices. Further studies may add other relevant management accounting as described by the International Federation of Accounting Committee to provide a more comprehensive management accounting practices. Practical implications – This study provides recommendations to the management of Islamic banks to design management accounting practices and management control systems that fit to their strategic orientation. Originality/value – This paper fulfils limited empirical studies on management accounting practices and strategy in Islamic banking industry.

Sukuk Negara diterbitkan sebagai upaya diversifikasi pembiayaan APBN sekaligus untuk pengembangan pasar keuangan syariah. Sejak 2008, selain Surat Utang Negara (SUN), Pemerintah memiliki alternatif instrumen pembiayaan APBN yang menyasar investor syariah. Namun berdasarkan hasil pengamatan, untuk tenor yang sama, Sukuk Negara memiliki rata-rata expected return (yield) lebih tinggi dibandingkan SUN. Penelitian ini bertujuan menganalisis faktor-faktor yang memengaruhi investor dalam menentukan liquidity premium Sukuk Negara terhadap SUN. Dimensi likuiditas seperti trading cost dan market depth serta terms Sukuk Negara, seperti time to maturity dan kupon, digunakan untuk menganalisis pengaruh tersebut. Hasil penelitian terhadap seri PBS003 dan PBS004 menunjukkan bahwa dimensi trading cost berpengaruh terhadap kedua seri tersebut. Namun untuk PBS003, terlihat bahwa dalam jangka panjang (t-5) investor lebih mengharapkan volatilitas pasar. Faktor likuiditas dalam memperhitungkan risiko menjadi pertimbangan investor dalam jangka pendek (t-3). Adapun dimensi market depth berpengaruh signifikan terhadap liquidity premium PBS004 namun tidak signifikan terhadap PBS003. Dimensi kedalaman pasar 4 bulan sebelumnya (t-4) signifikan memengaruhi liquidity premium PBS004. Tidak adanya market maker diduga menjadi salah satu penyebab lag dari dimensi kedalaman pasar. Terms Sukuk Negara signifikan mempengaruhi keputusan investor dalam menentukan liquidity premium.

Perkembangan bank Syariah tidak terlepas dari pengaruh krisis ekonomi global, dimana ketika guncangan keuangan menyebar ke real ekonomi selama fase krisis, bank syariah menderita kerugian tinggi dengan tingkat ketidakstabilan keuangan. Penting bagi bank syariah untuk menerapkan kebijakan dalam bisnis yang dilakukan untuk menentukan komposisi portofolio keuangannya. Penelitian ini bertujuan untuk menganalisis profil risiko dan imbal hasil pembiayaan perbankan syariah pada akad mudharabah, murabahah, dan istishna ketika terjadi krisis ekonomi. Metode analisis data yang digunakan dalam penelitian ini adalah model mean-variance yang diperkenalkan oleh Markowitz (1952), dengan menggunakan Microsoft Excel 2019. Sampel penelitian yang digunakan dalam penelitian ini berupa 3 instrumen pembiayaan antara lain pembiayaan murabahah, mudharabah, dan istishna pada BUS dan UUS. Data yang digunakan dalam penelitian ini adalah data sekunder yaitu bersumber dari laporan keuangan melalui situs resmi Otoritas Jasa Keuangan (OJK) dan Bank Indonesia (BI) tahun 2004-2021. Hasil pertama dalam penelitian ini adalah tingkat imbal hasil dan risiko periode sebelum krisis menunjukkan bahwa pembiayaan murabahah memiliki nilai rata-rata risiko dan nilai rata-rata imbal hasil aktual terbesar dari kedua pembiayaan yaitu murabahah dan istishna. Sedangkan imbal hasil dan risiko pada ekonomi krisis, pembiayaan mudharabah memiliki nilai rata-rata risiko dan nilai rata-rata imbal hasil aktual terbesar dari pembiayaan murabahah dan istishna. Dan pembiayaan Istishna merupakan pembiayaan yang memiliki nilai rata-rata imbal hasil dan risiko terendah pada kedua kondisi ekonomi tersebut dengan tren cenderung stabil. Hasil kedua menunjukkan bahwa Titik B ke C adalah pilihan alternatif portofolio investasi yang paling optimal atau disebut the most efficient portfolio frontier dari industri perbankan syariah periode 2004 sampai 2021.

The purpose of this paper is to find the optimal portfolio of Hajj fund management by the Islamic banks in Indonesia. BPKH, as an authority, can place the Hajj fund on Islamic bank deposits. However, Islamic banks limited the expected returns and risks set by BPKH so that the appropriate strategy is required to establish the optimal of portfolio. Islamic banks face a trade-off because of the increased level of risk constrains the intention to get higher returns. This study uses a mean-variance portfolio optimization theory to construct such an optimal portfolio. Finally, this study recommends Murabaha financing and SBIS to Islamic banks as the optimal portfolio selection. The combination of an efficient portfolio that has formed cannot be fully employed because the expectation limits them. However, Islamic banks can still select the optimal portfolio combination according to their risk preferences.

In the last decade, a number of Muslim countries experience an unqualified economic growth due to the rising of inequalities. The Fiscal and monetary policy become an important instrument to promote the inclusive growth that provides equal opportunity for people to enjoy growth. This study empirically investigates the impacts of fiscal policy (spending on health and education) as well as the monetary policy target (inflation and domestic credit by banks) to inclusive growth in 4 selected OIC countries (Indonesia, Malaysia, Qatar, Saudi Arabia). The results of the study with Error Correction Model shows that health expenditures positively and significantly influences the inclusive growth in Malaysia and Qatar in the short and long term, while the education expenditures positively and significantly influences the inclusive growth in Indonesia and Saudi Arabia. Inflation is only significant in the long term, while the domestic credit positively and significantly affect the inclusive growth in Saudi Arabia, Malaysia and Qatar in the long term. Based on these results, it is required to review the portion of expenditure in both sectors and the efficiency of the allocation to support inclusive growth. In addition, the strengthening of monetary policy, political stability and country security, as well as the expansion of the financial sector (financial deepening) to reach all people in getting access to finance to support the achievement of inclusive growth.

The research aimed at calculating the Operational Value at Risk (OpVar) in estimating the probability of the frequency of losses at Sharia Bank of XYZ, analyzing and assessing the event types of operational risks which have a great contribution in the operational losses of the bank, and determining the efficiency levels of the operational value at risk of capital charges of the bank. Measurement of operational risk in this study was conducted using the Loss Distribution Approach (LDA) Aggregated Model, as one of the Advanced Measurement Approach (AMA) models, which theoretically produces more efficient capital charges. The results showed that the contribution of the biggest losses came from the events of business disruption and system failure, execution, delivery & process management and internal fraud. The calculation of the operational risk of the bank conducted using the LDA-Aggregate produced lower capital charges than those using the Basic Indicator Approach.

Despite significant growth and development in recent years, Islamic banking (IB) continues to face widespread criticism due to its apparently weak social outcomes. This study investigates the social performance of Islamic banking in Indonesia, including its justification as an IB objective and the means of improvement. We surveyed 506 current and potential Islamic banking customers across six Indonesian provinces, combined with in-depth interviews with 10 Islamic banking experts consisting of regulators, practitioners, Sharia scholars, and academics. The findings strengthen previous results on the topic in that 42.89% of respondents consider that IB in Indonesia is socially defensive (doing the least that is required in terms of social outcomes), while 6.92% believe that it is reactive (doing less than that required). Of the remaining respondents, 34.78% consider the social performance as accommodative (doing all that is required) and 15.42% see it as proactive (doing more than is required). Most respondents (52.96%) suggest improvement by combining corporate social responsibility and the ZIS (Zakat, Infaq, shadaqah)-Waqf system. Only some (7.11%) suggest the establishment of Islamic social banking, whose main feature would be to design an alternative to collateral so that low- and middle-income customers could more readily access bank financing. We recommend that regulators and practitioners take action to address these challenges through incentives and long-term strategic planning

One major problem of Islamic banking in Indonesia today is the high Non-Performing Financing (NPF) with its ratio amounted to 5.68% in June 2016. This paper aimed to identify and examine both macroeconomic and bank-specific factors affecting NPF ratio of Islamic banking. Particularly, it used the panel data regression method with a monthly data basis of eleven Islamic commercial banks in Indonesia. Furthermore, there were two periods examined i.e. from December 2011 to June 2016 (no specific restrictions on economic performance) and from February 2013 to January 2015 (restriction on economic performance). Technically, the dependent variable was NPF ratio (NPF) and the independent variables were Industrial Production Index (IPI), Real Sales Index (IPR), the difference between the BI Rate and inflation (BIREAL), the exchange rate of Rupiah against the US Dollar (EXR), the annual growth of financing (GFINY ), the ratio of financing to total assets (FINTA), the Capital Adequacy Ratio (CAR), Return on Assets ratio (ROA), the coverage of loan loss provision (CKPN), and the concentration of financing in the real estate sector (REFIN). The results showed that in the two periods examined, NPF was significantly influenced by the internal factors. In the first period, NPF was significantly influenced by GFINY, CKPN, and REFIN while in the second period, NPF was significantly influenced by CAR, ROA, CPKN, and REFIN. This shows that the quality of risk management implementation, profitability and capital are important factors in reducing the NPF ratio.

Purpose – This paper attempts to construct Islamic gracious monetary instruments namely Qardh hassan, Waqf and Gift central bank certificates. The certificates do not only function as monetary instruments per se, but also give economic and social benefit for the public such as the needy. However, the central bank and its counterparts still need to manage the funds professionally to produce profit, maintain the values of the funds and prevent business losses. As such, this theoretical study aims to offer alternative Islamic monetary instruments for the central bank to manage liquidity and especially to improve the welfare of the people. Design/methodology/approach – The paper exercises three Islamic gracious monetary instruments (Qardh hassan, Waqf and Gift central bank certificates) for both investment based (Mudarabah and Musharakah) financing and trading based (Ijarah and Murabahah) financing. Every instrument is elaborated mathematically to analyze its economic impact, treatment of profit and loss coming from the business and status of the funds. Finally, the paper compares every gracious certificate and explains the terms and conditions to use them optimally. Findings – The exercises find unique characteristics, operations and contribution of every Islamic gracious monetary instrument to the economy. Based on economic impact, nature of the contracts and management of the funds, the central bank can now have alternative Islamic monetary instruments to be offered to the generous depositors to improve the welfare of the people particularly the needy. Research limitations/implications – The paper only assesses the feasibility of three Islamic gracious monetary instruments. There might be more alternatives of Islamic gracious monetary instruments to be considered and elaborated. Originality/value – To the best of author’s knowledge, this is the first paper to try to exercise the alternative of the Islamic gracious monetary instruments.

This study aims to determine the factors that affect the equity financing at the Islamic Banking which covers quantitative financing profit and loss sharing and to formulate policies to be performed by the management in maintaining the financing growth. The study was conducted by utilizing Autoregressive Distributed Lag (ARDL) model with variables including BI rate and inflation as the external factor. The test results of both external factors indicated a negative impact on both financing. BI rate as an indicator of the government's policy becomes the fastest variable affecting the equity financing i.e. at lag 1. Inflation comes as the macroeconomic indicator at lags 2, 9 and 10. All internal factors have a negative impact on both financing types except for the cost of education and training, and autoregressive variables. The fund of the third party influences the sharing of profit and loss (mudharabah) at lag 1 and at 9, meanwhile the capital adequacy ratio affects the profit sharing (mudharabah) at lag 8, and it affects the loss sharing (musyarakah) at lag 6. The cost of education and training has an effect on loss sharing at lag 5, and Islamic banking basic education affects profit financing at lag 2 whereas the trend of financing profit sharing is at lag 8 and loss sharing at lags 1 and 2 and since it autoregressive, it affects each financing of the current period.