Indonesia Conference Directory

The existance of so called dilemma between non performing financing (NPF) and needs of financing, particularly in microfinance has become a great homework for banking industry and cooperatives along with its related instruments. It is plausible to look for the causes of NPF as well as its implications to micro and small enterprises. Research purposes are twofolds, to figure out and analyze factors influencing Non Performing Financing of Islamic banking as well as to generate suggestions on its implications toward Lembaga Pengelola Dana Bergulir Koperasi dan Usaha Kecil Menengah (LPDB KUKM). This research is conducted in quantitative approach. It covers two variables, macroeconomy and Islamic banking financial performance (BUS, UUS, and BPRS) in Indonesia towards Non Performing Finance (NPF). The research findings include several factors, such as current depreciation, increase in quantity of Islamic micro financing, and inefficiency of Islamic banking operation, that contributes to the rising NPF in Islamic banking in Indonesia. However, the increase in Islamic banking office networks can tackling potensial growth of NPF. The research implicates in policy associated to Lembaga Pengelola Dana Bergulir Koperasi dan Usaha Kecil Menengah (LPDB-KUKM), as General Service Agency (Badan Layanan Umum or BLU) at the Ministry of Cooperation and Small and Medium Enterprises. LPDB KUKM, in allocating revolving funds for Islamic micro enterprises with Islamic scheme, can cooperate with Islamic banking, either BUS, UUS, and BPRS considering that Islamic banking has developed number of networks which could expand the reach of Islamic micro financing programs.