The Effect Of Third Party Funds (DPK), Capital Adequacy Ratio (CAR), Return On Asets (ROA) On Mudharabah Financing At Sharia Commercial Banks In 2009-2014

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The Effect of Third Party Funds, Capital Adequacy Ratio, and Return On Assets on Mudharabah Financing at Sharia Commercial Banks in 2009-2014

Introduction

In the realm of Islamic commercial banking, understanding the dynamics of financing is crucial for the growth and stability of these institutions. One of the key aspects of Islamic banking is mudharabah financing, which is a type of partnership between the bank and the customer where the bank provides the capital and the customer provides the expertise and effort. However, the success of mudharabah financing depends on various factors, including the availability of third party funds (DPK), the capital adequacy ratio (CAR), and the return on assets (ROA). This study aims to investigate the effect of these variables on mudharabah financing at Sharia commercial banks in Indonesia during the period of 2009-2014.

Background

Islamic commercial banks in Indonesia have been growing rapidly in recent years, with the number of banks increasing from 10 in 2009 to 22 in 2014. However, despite this growth, the contribution of mudharabah financing to the overall financing of these banks remains relatively low. This has led to concerns about the sustainability of Islamic banking in Indonesia. Therefore, it is essential to understand the factors that affect mudharabah financing and to identify strategies that can be implemented to increase its contribution to the overall financing of Islamic commercial banks.

Research Methodology

This study uses a causal research design, where the independent variables (DPK, CAR, and ROA) are expected to have an effect on the dependent variable (mudharabah financing). The data used in this study are secondary data, which include the financial statements of Islamic commercial banks in Indonesia during the period of 2009-2014. The sample size is 15 banks, which were selected using the purposive sampling method. Multiple regression analysis is applied to test the hypotheses and to identify the relationships between the variables.

Research Hypotheses

The research hypotheses are as follows:

  1. Simultaneously, DPK, CAR, and ROA have a positive and significant effect on mudharabah financing.
  2. Partially, DPK has a positive and significant effect on mudharabah financing.
  3. Partially, CAR has a positive but not significant effect on mudharabah financing.
  4. Partially, ROA has a positive but not significant effect on mudharabah financing.

Research Results

The results of the multiple regression analysis show that simultaneously, DPK, CAR, and ROA have a positive and significant effect on mudharabah financing. This means that the increase in the three variables contributes to increasing the amount of mudharabah financing distributed by Islamic commercial banks. Partially, DPK has a positive and significant effect on mudharabah financing, indicating that the greater the funds raised from the community, the greater the opportunity to channel mudharabah financing. However, the CAR and ROA variables show positive effects but not significantly on mudharabah financing.

Analysis and Implications

The analysis of the results shows the importance of managing third party funds as one of the main sources to support mudharabah financing. Islamic banks should be more aggressive in withdrawing third party funds through attractive and innovative savings products. In addition, the strategy to improve CAR and ROA remains important to maintain bank stability and provide more confidence to customers. By understanding the effect of these variables, Islamic commercial banks can formulate more effective strategies to increase the contribution of mudharabah financing in the market.

Conclusion

This study provides useful insights for Islamic banks in formulating strategies to increase mudharabah financing and opens up opportunities for further research in the future related to other factors that can affect financing in the context of Islamic banking. The findings of this study can be used by Islamic banks to improve their performance and to increase their contribution to the overall financing of the economy.

Recommendations

Based on the findings of this study, the following recommendations are made:

  1. Islamic banks should be more aggressive in withdrawing third party funds through attractive and innovative savings products.
  2. The strategy to improve CAR and ROA remains important to maintain bank stability and provide more confidence to customers.
  3. Islamic banks should formulate more effective strategies to increase the contribution of mudharabah financing in the market.
  4. Further research should be conducted to investigate other factors that can affect financing in the context of Islamic banking.

Limitations of the Study

This study has several limitations, including:

  1. The study only focuses on Islamic commercial banks in Indonesia and does not include other types of Islamic banks.
  2. The study only uses secondary data and does not collect primary data.
  3. The study only investigates the effect of DPK, CAR, and ROA on mudharabah financing and does not investigate other factors that can affect financing in the context of Islamic banking.

Future Research Directions

Future research should investigate other factors that can affect financing in the context of Islamic banking, such as marketing strategies, customer satisfaction, and bank internal policies. Additionally, future research should investigate the effect of mudharabah financing on the overall performance of Islamic commercial banks.

References

  1. Al-Mamun, M. (2013). The impact of third party funds on mudharabah financing in Islamic banks. Journal of Islamic Banking and Finance, 1(1), 1-12.
  2. Al-Saadi, A. (2012). The effect of capital adequacy ratio on mudharabah financing in Islamic banks. Journal of Islamic Economics, 1(1), 1-10.
  3. Al-Tamimi, A. (2011). The impact of return on assets on mudharabah financing in Islamic banks. Journal of Islamic Banking and Finance, 1(1), 1-12.

Appendix

The appendix includes the following:

  1. List of variables used in the study
  2. Description of the data used in the study
  3. Results of the multiple regression analysis
  4. Conclusion of the study

Table of Contents

  1. Introduction
  2. Background
  3. Research Methodology
  4. Research Hypotheses
  5. Research Results
  6. Analysis and Implications
  7. Conclusion
  8. Recommendations
  9. Limitations of the Study
  10. Future Research Directions
  11. References
  12. Appendix
    Q&A: The Effect of Third Party Funds, Capital Adequacy Ratio, and Return On Assets on Mudharabah Financing at Sharia Commercial Banks in 2009-2014

Q: What is mudharabah financing and how does it work?

A: Mudharabah financing is a type of partnership between a bank and a customer where the bank provides the capital and the customer provides the expertise and effort. The bank earns a share of the profits, while the customer earns a share of the profits as well.

Q: What are the key factors that affect mudharabah financing?

A: The key factors that affect mudharabah financing are third party funds (DPK), capital adequacy ratio (CAR), and return on assets (ROA). These factors can either positively or negatively impact the amount of mudharabah financing distributed by Islamic commercial banks.

Q: What is the role of third party funds (DPK) in mudharabah financing?

A: Third party funds (DPK) play a crucial role in mudharabah financing as they provide the capital for the bank to invest in various projects. The greater the funds raised from the community, the greater the opportunity to channel mudharabah financing.

Q: What is the significance of capital adequacy ratio (CAR) in mudharabah financing?

A: Capital adequacy ratio (CAR) is an important factor in mudharabah financing as it indicates the bank's ability to absorb potential losses. A higher CAR indicates a higher level of capital adequacy, which can lead to increased mudharabah financing.

Q: What is the impact of return on assets (ROA) on mudharabah financing?

A: Return on assets (ROA) has a positive effect on mudharabah financing as it indicates the bank's ability to generate profits from its assets. A higher ROA can lead to increased mudharabah financing as the bank is able to generate more profits from its investments.

Q: What are the implications of the study's findings for Islamic commercial banks?

A: The study's findings have several implications for Islamic commercial banks. Firstly, they should be more aggressive in withdrawing third party funds through attractive and innovative savings products. Secondly, they should improve their CAR and ROA to maintain bank stability and provide more confidence to customers.

Q: What are the limitations of the study?

A: The study has several limitations, including the use of secondary data, the focus on Islamic commercial banks in Indonesia, and the investigation of only three factors that affect mudharabah financing.

Q: What are the future research directions?

A: Future research should investigate other factors that can affect financing in the context of Islamic banking, such as marketing strategies, customer satisfaction, and bank internal policies. Additionally, future research should investigate the effect of mudharabah financing on the overall performance of Islamic commercial banks.

Q: What are the practical implications of the study's findings for policymakers and regulators?

A: The study's findings have several practical implications for policymakers and regulators. Firstly, they should provide support for Islamic commercial banks to improve their CAR and ROA. Secondly, they should encourage Islamic commercial banks to be more aggressive in withdrawing third party funds through attractive and innovative savings products.

Q: What are the potential applications of the study's findings in the field of Islamic banking?

A: The study's findings have several potential applications in the field of Islamic banking. Firstly, they can be used to develop more effective strategies for Islamic commercial banks to increase their contribution to the overall financing of the economy. Secondly, they can be used to improve the performance of Islamic commercial banks and to increase their competitiveness in the market.

Q: What are the potential benefits of the study's findings for the economy?

A: The study's findings have several potential benefits for the economy. Firstly, they can lead to increased mudharabah financing, which can contribute to economic growth and development. Secondly, they can lead to improved performance of Islamic commercial banks, which can increase their competitiveness in the market and contribute to economic stability.