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Islamic Rural Banking Risk in Indonesia: Does Macroeconomic Variable Matter?
Agus Widarjono, M.B. Hendrie Anto and Faaza Fakhrunnas

Department of Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia


Islamic banking as a financial intermediary is very vulnerable to bankruptcy. One measure of bankruptcy is non-performing financing (NFP). Indonesian Islamic bank consists of Islamic commercial bank and Islamic rural bank. The NPF level of Islamic rural banks is above the maximum threshold. This paper investigates the impact of bank characteristic variables such as assets, financing, CAR, and efficiency and macroeconomic variables such as national output and inflation on NPF. The results show that assets, CAR, and efficiency have a positive effect on NPF while financing has a negative effect on NPF. The domestic output has a negative effect on NFP and the inflation has a positive effect on the NPF. More interestingly, the effect of macro variables is asymmetric on NPF. An increase in output does not decrease the NPF but when a decrease in output raises the NPF. Whereas the inflation worsens the NPF compared to the deflation

Keywords: Non Performing Financing, Islamic rural bank, NARDL, Indonesia

Topic: Islamic Economics and Business


Conference: The 2nd Mulawarman International Conference on Economics and Business (MICEB 2019)

Plain Format | Corresponding Author (Mohammad Bekti Hendrie Anto)

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