Factors Influencing Third-Party Funds of Islamic Bank: A Case Study in Indonesia
DOI:
https://doi.org/10.24191/e-aj.v12i2.12206Keywords:
Indonesia, Islamic Bank, Sharia Banking, Third Party FundAbstract
This study examines the factors influencing the Third Party Fund (TPF) of Islamic Banks in Indonesia, with a focus on the constructs of Size (Total Assets), Liquidity (measured by the Financing to Deposit Ratio), and Gross Domestic Product (GDP). The data for the study were collected from five Islamic Banks over a period of five years, resulting in a dataset of 100 observations. The research employs a quantitative research method, utilizing multiple linear regression. The results of the analysis indicate that both Size and Liquidity have a significant positive impact on TPF, suggesting that higher levels of Size (Total Assets) and favourable liquidity conditions can contribute to an increase in TPF. However, the hypothesis regarding the impact of GDP on TPF was not supported, indicating that GDP does not have a significant relationship with TPF in this context. These findings have important implications for the management of Islamic Banks in Indonesia. Bank managers should prioritize strategies that enhance liquidity management and ensure sufficient total assets. By maintaining favourable liquidity conditions and expanding total assets, banks can attract more Third-Party Funds, thus fostering growth and stability in the Islamic banking sector. Furthermore, the study highlights the role of regulatory oversight in
maintaining public trust in Islamic Banks. Effective regulatory frameworks and supervision are crucial in ensuring compliance with Islamic principles and promoting public confidence. In conclusion, this study provides valuable insights into the factors influencing TPF in Islamic Banks in Indonesia.
References
Abasimel, N. A. (2022). Islamic banking and economics: concepts and instruments, features, advantages, differences from conventional banks, and contributions to economic growth. Journal of the Knowledge Economy, 1–28. https://doi.org/10.1007/S13132-022-00940-Z/METRICS
Abbas, F., Ali, S., & Ahmad, M. (2021). Does economic growth affect the relationship between banks’ capital, liquidity, and profitability: empirical evidence from emerging economies. Journal of Economic and Administrative Sciences, 39(2), 366–381. https://doi.org/10.1108/JEAS-03-2021-0056
Abubakar, A. S., & Aduda, Dr. J. (2017). Islamic banking and investment financing: a case of islamic banking in Kenya. International Journal of Finance, 2(1), 66–87. https://doi.org/10.47941/IJF.42
Afdal, Z., Siwi, M. K., Kurniawati, T., & Marwan. (2021). Analysis of the effect of macroeconomic variables on third party funds of sharia banking in Indonesia 2009-2020. Proceedings of the Seventh Padang International Conference on Economics Education, Economics, Business and Management, Accounting and Entrepreneurship, 192(Piceeba), 71–77.
https://doi.org/10.2991/AEBMR.K.211117.037
Aggarwal, R. K., & Yousef, T. (2000). Islamic banks and investment financing. Journal of Money, Credit and Banking, 32(1), 93. https://doi.org/10.2307/2601094
Alamsyah, M. H. (2021). The effect of third-party funds and non-performing financing on the performance of islamic banks (case study at PT Bank Muamalat Indonesia Tbk). Budapest International Research and Critics Institute-Journal (BIRCI-Journal), 4(4), 14103–14116.
https://doi.org/10.33258/birci.v4i4.3513
Albaity, M., & Rahman, M. (2021). Customer loyalty towards islamic banks: the mediating role of trust and attitude. Sustainability, 13(19), 10758. https://doi.org/10.3390/SU131910758
Albulescu, C. T. (2015). Banks’ Profitability and Financial Soundness Indicators: A Macro-level Investigation in Emerging Countries. Procedia Economics and Finance, 23, 203–209.
https://doi.org/10.1016/S2212-5671(15)00551-1
Al-Nasser Mohammed, S. A. S., & Muhammed, J. (2017). The relationship between agency theory, stakeholder theory and Shariah supervisory board in Islamic banking: An attempt towards discussion. Humanomics, 33(1), 75–83. https://doi.org/10.1108/H-08-2016-0062/FULL/PDF
Al-Shaghdari, F., Hakami, T. A., Bardai, B., & Saleh, A. O. H. (2023). Investigating the parameters influencing islamic banks financial performance: evidence from five Southeast Asian Countries. Lecture Notes in Networks and Systems, 488, 29–50. https://doi.org/10.1007/978-3-031-08090-6_2/COVER
Amaliawiati, L., Hendayana, Y., & Sarumpaet, T. L. (2019). The impact of macroeconomics towards Islamic banking third party funds in Indonesia. International Journal of Innovation, Creativity and Change, 6(6), 291–303.
Aryani, Y., Anggraeni, L., & Wiliasih, R. (2016). Determinant of non-performing financing in Islamic banking Indonesia, 2010-2014. Al-Muzara’ah, 4(1), 44–60. https://doi.org/10.29244/JAM.4.1.44-60
Awan, H. M., & Bukhari, K. S. (2011). Customer’s criteria for selecting an Islamic bank: evidence from Pakistan. Journal of Islamic Marketing, 2(1), 14–27. https://doi.org/10.1108/17590831111115213
Boukhatem, J., & Ben Moussa, F. (2018). The effect of Islamic banks on GDP growth: some evidence from selected MENA countries. Borsa Istanbul Review, 18(3), 231–247.
https://doi.org/10.1016/J.BIR.2017.11.004
Dusuki, A. W. (2008). Understanding the objectives of Islamic banking: a survey of stakeholders’ perspectives. International Journal of Islamic and Middle Eastern Finance and Management, 1(2),132–148. https://doi.org/10.1108/17538390810880982
Ghozali, I. (2018). Multivariate Analysis Application with IBM SPSS 25 Program (9th ed) (9th ed.). UndipPress.
Hassan, A., Sohail, M. S., & Munshi, M. M. R. (2022). Shariah governance and agency dynamics of Islamic banking operations in the Kingdom of Saudi Arabia. ISRA International Journal of Islamic Finance,14(1), 89–106. https://doi.org/10.1108/IJIF-12-2020-0252/FULL/PDF
Hidayah, T., & Tanjung, A. A. (2022). Effect of results and inflation on third party funds in Sharia commercial banks and Sharia business units’ period 2011-2020. International Journal of Science, Technology & Management, 3(5), 1276–1284. https://doi.org/10.46729/IJSTM.V3I5.627
Indiastary, D., Suprayogi, N., & Indrawan, I. W. (2020). A meta-analysis of the determinant of third-party fund on Islamic banking in Indonesia. Jurnal Ekonomi Dan Bisnis Islam (Journal of Islamic Economics and Business), 6(2), 175–188. https://doi.org/10.20473/jebis.v6i2.12766
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
Jobst, A. A. (2014). Measuring Systemic Risk-Adjusted Liquidity (SRL)—A model approach. Journal of Banking & Finance, 45(1), 270–287. https://doi.org/10.1016/J.JBANKFIN.2014.04.013
Ledhem, M. A., & Mekidiche, M. (2020). Economic growth and financial performance of Islamic banks: a CAMELS approach. Islamic Economic Studies, 28(1), 47–62. https://doi.org/10.1108/IES-05-2020-0016
Masood, O., & Javaria, K. (2017). Liquidity risk Management and financial performance of Islamic banks: Empirical evidence from global Islamic banks. Journal of Islamic Financial Studies, 3(2), 62–70.
https://doi.org/10.12785/jifs/030201
Mimouni, K., Smaoui, H., Temimi, A., & Al-Azzam, M. (2019). The impact of sukuk on the performance of conventional and Islamic banks. Pacific-Basin Finance Journal, 54, 42–54.
https://doi.org/10.1016/J.PACFIN.2019.01.007
Musrifah, F., & Mariana, M. (2022). Effect of profit sharing, size, FDR, and BI 7-day repo rate on third party fund collection of Islamic commercial banks in Indonesia in the 2014-2019 period. Jurnal Bina Akuntansi, 9(1), 37–55. https://doi.org/10.52859/JBA.V9I1.195
Novitasari, M., Aviyanti, R. D., Adiba, W., & Ismail, W. (2022). The role of third-party funds on the effect of intellectual capital and zakat performing ratio on firm performance in Islamic banks. Journal of Islamic Accounting and Finance Research, 4(2), 283–300.
https://doi.org/10.21580/JIAFR.2022.4.2.11890
OJK. (2022). OJK: Sharia Banking Performance Shows Better Performance Than Conventional Banks.
President of Republic Indonesia. (1992). Indonesian Law No. 7 Year 1992.
Priyadi, U., Utami, K. D. S., Muhammad, R., & Nugraheni, P. (2021). Determinants of credit risk of Indonesian Sharīʿah rural banks. ISRA International Journal of Islamic Finance, 13(3), 284–301.
https://doi.org/10.1108/IJIF-09-2019-0134/FULL/PDF
Purwohandoko, P., & Iriani, S. S. (2021). Effect of gross domestic product, liquidity, size, growth, capital adequacy ratio, and inflation on financial performance. Equilibrium: Jurnal Ekonomi-ManajemenAkuntansi, 17(1), 46. https://doi.org/10.30742/EQUILIBRIUM.V17I1.1423
Rabbani, M. R., Ali, M. A. M., Rahiman, H. U., Atif, M., Zulfikar, Z., & Naseem, Y. (2021). The response of Islamic financial service to the COVID-19 pandemic: The open social innovation of the financial system. Journal of Open Innovation: Technology, Market, and Complexity, 7(1), 85.
https://doi.org/10.3390/JOITMC7010085
Riauwanto, S., & Sulastiningsih, S. (2020). The influence of total assets and banking profit sharing on the volume of third-party funds (TPF) in Sharia commercial banks. Jurnal Riset Manajemen Sekolah Tinggi Ilmu Ekonomi Widya Wiwaha Program Magister Manajemen, 6(2), 131–146.
https://doi.org/10.32477/JRM.V6I2.19
Rouetbi, M., Ftiti, Z., & Omri, A. (2023). The impact of displaced commercial risk on the performance of Islamic banks. Pacific-Basin Finance Journal, 79, 102022.
https://doi.org/10.1016/J.PACFIN.2023.102022
Saiti, B., Abdul Wahab, H., & Ahmad, K. (2017). Contracts, structures, and computation mechanisms of Islamic bank retail financing products: A critical assessment. Islamic Banking, 81–125.
https://doi.org/10.1007/978-3-319-45910-3_5
Saivasan, R., & Lokhande, M. (2022). Influence of risk propensity, behavioral biases and demographic factors on equity investors’ risk perception. Asian Journal of Economics and Banking, 6(3), 373–403.
https://doi.org/10.1108/AJEB-06-2021-0074
Sathyamoorthi, C. R., Mapharing, M., & Dzimiri, M. (2020). Liquidity management and financial performance: Evidence from commercial banks in Botswana. International Journal of Financial Research, 11(5), 399–413. https://doi.org/10.5430/ijfr.v11n5p399
Septiatin, A. (2022). Influence of third party funds, BI rate, inflation on market share in Islamic banking.
Al-Masharif: Jurnal Ilmu Ekonomi Dan Keislaman, 10(1), 1–16.
https://doi.org/10.24952/MASHARIF.V10I1.5706
Shi, Z., Qin, S., Chiu, Y. ho, Tan, X., & Miao, X. (2021). The impact of gross domestic product on the financing and investment efficiency of China’s commercial banks. Financial Innovation, 7(1), 1–23.
https://doi.org/10.1186/S40854-021-00251-3/FIGURES/6
Sugiyono. (2021). Quantitative, Qualitative, and R&D Research Methods (3rd ed.). Alfabeta.
https://opac.perpusnas.go.id/DetailOpac.aspx?id=1543971
Susianti, N., Hasanah, U., Awwalunnisa, N., & Irwan, M. (2022). Determinants of increasing the number of third-party funds in Shariah banking. International Journal of Health Sciences, 6(S8), 1965–1976.
https://doi.org/10.53730/IJHS.V6NS8.12528
Tripathi, A., Dixit, A., & Vipul, V. (2020). Liquidity of financial markets: a Review. Studies in Economics and Finance, 37(2), 201–227. https://doi.org/10.1108/SEF-10-2018-0319/FULL/PDF
Yahaya, A., Mahat, F., M.H, Y., & Matemilola, B. T. (2022). Liquidity risk and bank financial performance: an Application of system GMM approach. Journal of Financial Regulation and Compliance, 30(3), 312–334. https://doi.org/10.1108/JFRC-03-2021-0019/FULL/PDF
Downloads
Published
Issue
Section
License
Copyright (c) 2023 Sartono Sartono, Andriyan Eka Sapta, Iqbal Reza Pratama
This work is licensed under a Creative Commons Attribution 4.0 International License.
