Determinants of Sharia Banking Performance in Indonesia: A Financial Perspective

Meidawati Neni (), Lubis Dani Husin Aqwam () and Kholid Muamar Nur ()
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Meidawati Neni: Department of Accounting, Universitas Islam Indonesia, Condongcatur, Sleman, Daerah Istimewa Yogyakarta 55283 Indonesia
Lubis Dani Husin Aqwam: Department of Accounting, Universitas Islam Indonesia, Condongcatur, Sleman, Daerah Istimewa Yogyakarta 55283 Indonesia
Kholid Muamar Nur: Department of Accounting, Universitas Islam Indonesia, Condongcatur, Sleman, Daerah Istimewa Yogyakarta 55283 Indonesia

HOLISTICA – Journal of Business and Public Administration, 2025, vol. 16, issue 1, 58-72

Abstract: This study investigates the determinants of the financial performance (FP) of Sharia banks in Indonesia. FP is defined using Return on Assets (RonA). This study utilizes secondary data sourced from the financial statements of Sharia Banks registered on the Indonesia Stock Exchange (IDX) 2019 to 2022. The measurement of each variable is adopted from prior research studies. The collected data is analyzed using multiple regression techniques. The data analysis yielded compelling evidence that Capital Adequacy Ratio (CARo) and Net Income (NIn) exert a significantly positive influence on the profitability performance of Sharia banks in Indonesia. Conversely, Operational Expense Ratio (OERo) is found to have a significant negative impact on profitability. Interestingly, Non-Performing Financing (NPFi) and Debt-to-Asset Ratio (DARo) do not exhibit statistically significant effects on profitability, suggesting that these factors do not play a decisive role in determining the profitability of Sharia banks in Indonesia. Credit extension serves as a cornerstone of the banking sector, driving revenue generation and economic growth. While the study’s findings indicate that NPFi does not exert a direct and consistent impact on profitability, it is imperative for Sharia banks to continuously strive for credit quality improvement.

Keywords: Performance; Profitability; Sharia Banks; Indonesia (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:hjobpa:v:16:y:2025:i:1:p:58-72:n:1004

DOI: 10.2478/hjbpa-2025-0004

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