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The impact of bank-specific and macroeconomic variables on profitability of Islamic rural bank in Indonesia
Muhammad Sanusi (a*), Siti Zulaikha (b)

a) Master Candidate of Islamic Economic, Faculty of Economic and Business, Universitas Airlangga, Surabaya, Indonesia
*sanusiekis171[at]gmail.com
b) Departement of Islamic Economics, Faculty of Economic and Business, Universitas Airlangga, Surabaya, Indonesia


Abstract

This paper investigates the impact of bank-specific and macroeconomic variables on the profitability of Islamic rural bank (BPRS) in Indonesia. Using monthly time series data from January 2010 - December 2018. The estimation model used is a vector error correction model to analyze the long-term and short-term relationships between bank-specific and macroeconomic variables on the profitability of Islamic rural bank. The results showed that in long-run CAR and LnTA had a positive and significant relationship, while NPF, BOPO and IPI had a negative and significant relationship to the profitability of Islamic rural banks. But FDR and Inflation variables are not significantly related to the profitability of Islamic rural bank. The results leave implications for policy makers, investors and banking sector managers. Based on evidence that bank profitability is more influenced by internal banks (as specific as banks), this research can help Islamic rural banks to help them understand which factors are important to be analyzed to obtain higher profitability.

Keywords: Bank-specific, Islamic rural bank (BPRS), Macroeconomic, VECM

Topic: Islamic Micro finance

Link: https://ifory.id/abstract/2ZnBrKpz7fCX

Conference: THE 4th ANNUAL ISLAMIC FINANCE CONFERENCE (AIFC 2019)

Plain Format | Corresponding Author (Muhammad Sanusi)

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