FINANCING GROWTH AND BANK RISK: EMPIRICAL EVIDENCE FROM INDONESIA
DOI:
https://doi.org/10.32332/finansia.v7i1.7442Keywords:
Financing Growth, Bank Risk, Profitability, SolvencyAbstract
This study examines the crucial issue of the impact of financing growth on various dimensions of Islamic Banks in Indonesia. The growth of financing affects bank risk, profitability, and solvency. The main objective explains the relationship between financing growth and key performance indicators. The study uses ROA for profitability, EQTA for capital adequacy, NPF for bank risk, and the natural logarithm of Total Assets as a proxy for bank size. LIQD and CIR are included as additional variables to provide a more comprehensive analysis. Data for the period Q1 2012 to Q4 2020, obtained from the publication report on the OJK website. Using multiple linear regression, the findings showed a negative relationship between bank risk and financing growth. In addition, the growth of financing has a positive effect on both profitability and solvency of banks. This confirms the importance of prudential principles to optimize risk management strategies, especially in the context of a growing role in financing growth in Islamic banks.
References
Akram, Hassan., And Rahman, Khalil Ur. “Credit Risk Management: A Comparative Study Of Islamic Banks And Conventional Banks In Pakistan.” ISRA International Journal Of Islamic Finance, Vol. 10, No. 2, 2018. https://doi.org/10.1108/IJIF-09-2017-0030.
Al-Wesabi, Hamid A. H., And Ahmad, Nor Hayati Bt. “Credit Risk Of Islamic Banks In GCC Countries.” International Journal Of Banking And Finance, Vol. 10, No. 2, 2013. https: //doi.org/10.32890/ijbf2013.10.2.8476.
Alzoubi, Tariq., And Obeidat, Muhanned. “How Size Influences The Credit Risk In Islamic Banks.” Cogent Business and Management, Vol. 7, No. 1, 2020. https://doi.org/10. 1080/23311975.2020.1811596.
Bhowmik, Probir Kumar., And Sarker, Niluthpaul. “Loan Growth And Bank Risk: Empirical Evidence From SAARC Countries.” Heliyon, Vol. 7, No. 5, 2021. https://doi.org/10. 1016/j.heliyon.2021.e07036.
Boadi, Boadi., Isaac, Isaac., Osarfo, Daniel., And Boadi, Perpetual. “Bank-Based And Market-Based Development And Economic Growth: An International Investigation.” Studies In Economics And Finance, Vol. 36, No. 3, 2019. https://doi.org/10.1108/SEF-12-2017-0346.
Bouheni, Faten Ben., Obeid, Hassan., And Margarint, Elena. "Nonperforming Loan Of European Islamic Banks Over The Economic Cycle." Annals Of Operations Research. Vol. 313, No. 2, 2022. https://doi.org/10.1007/s10479-021-04038-8.
Statistik, Badan Pusat. “Populasi Muslim.” https://bps.go.id/. Retrieved November 10, 2023.
Chamberlain, Trevor., Hidayat, Sutan., And Khokhar, Abdul Rahman. “Credit Risk In Islamic Banking: Evidence From The GCC.” Journal Of Islamic Accounting And Business Research, Vol. 11, No. 5, 2020. https://doi.org/10.1108/JIABR-09-2017-0133.
Dang, Van Dan. “The Effects Of Loan Growth On Bank Performance: Evidence From Vietnam.” Management Science Letters, Vol. 9, No. 6, 2019. https://doi.org/10.5267/ j.msl.2019.2.012.
Ebenezer, Olalere Oluwaseyi., Islam, Md Aminul., Junoh, Mohd Zukime Mat., And Yusoff, Wan Sallha. “Loan Growth, Bank Solvency And Firm Value: A Comparative Study Of Nigerian And Malaysian Commercial Banks.” Journal Of Reviews On Global Economics, Vol. 8, 2019. https://doi.org/10.6000/1929-7092.2019.08.32.
Fadila, Ihda. “September 2016, Pangsa Pasar Bank Syariah Tembus 5,3%.” https://finansial.bisnis.com/read/20160927/90/587449/september-2016-pangs a-pasar-bank-syariah-tembus-53. Retrieved October 22, 2023.
Foos, Daniel., Norden, Lars., And Weber, Martin. “Loan Growth And Riskiness Of Banks.” Journal Of Banking And Finance, Vol. 34, No. 12, 2010. https://doi.org/10.1016 /j.jbankfin.2010.06.007.
Ho, Tin H., Le, Tu D.Q., And Nguyen, Dat T. “Abnormal Loan Growth And Bank Risk-Taking In Vietnam: A Quantile Regression Approach.” Cogent Business And Management, Vol. 8, No. 1, 2021. https://doi.org/10.1080/23311975.2021.1908004.
Hosen, Mosharrof., Broni, Mohammed Yaw., And Uddin, Mohammad Nazim. “What Are The Bank Specific And Macroeconomic Elements Influence Non-Performing Loans In Bangladesh? Evidence From Conventional And Islamic Banks.” Green Finance, Vol. 2, No. 2, 2020. https://doi.org/10.3934/gf.2020012.
Ibrahim, Mansor H., And Rizvi, Syed Aun R. “Bank Lending, Deposits And Risk-Taking In Times Of Crisis: A Panel Analysis Of Islamic And Conventional Banks.” Emerging Markets Review, Vol. 35, 2018. https://doi.org/10.1016/j.ememar.2017.12.003.
Ilmi, Muhammad Bahrul. “The Analysis Of The Effect Of Islamic Financing And Labor Relationship Development Towards Non-Performing Financing In Islamic Banks.” Journal Of Islamic Accounting And Business Research, Vol. 34, No. 1, 2015. https://doi.org/10.1108/ JIABR-02-2015-0002.
Incekara, Ahmet., And Cetinkaya, Harun. “Credit Risk Management: A Panel Data Analysis On The Islamic Banks In Turkey.” Procedia Computer Science, Vol. 158, 2019. https://doi.org/10.1016/j.procs.2019.09.135.
Indonesia, Bank. Bank Indonesia Regulation Number 15/2/PBI/2013. Bank Indonesia, 2013.
Karim, Mastura Abdul., Hassan, M. Kabir., Hassan, Taufiq., And Mohamad, Shamsher. “Capital Adequacy And Lending And Deposit Behaviors Of Conventional And Islamic Banks.” Pacific Basin Finance Journal, Vol. 28, 2014. https://doi.org/10.1016/j. pacfin.2013.11.002.
Kashif, Muhammad., Iftikhar, Syed Faizan., And Iftikhar, Khurram. “Loan Growth And Bank Solvency: Evidence From The Pakistani Banking Sector.” Financial Innovation, Vol. 2, No. 1, 2016. https://doi.org/10.1186/s40854-016-0043-8.
Keuangan, Otoritas Jasa. “Laporan Publikasi.” https://www.ojk.go.id/id/, Retrieved November 10, 2023.
Kohler, Matthias. “Which Banks Are More Risky? The Impact Of Business Models On Bank Stability.” Journal Of Financial Stability, Vol. 16, No. 33, 2015. https://doi.org/ 10.1016/j.jfs.2014.02.005.
Kurnia, Riana Afliha Eka., Sawarjuwono, Tjiptohadi., Dan Herianingrum, Sri. “Manajemen Risiko Pembiayaan Untuk Mengantisipasi Kondisi Financial Distress Pada Bank Syariah.” Journal Of Islamic Economics Lariba, Vol. 3, No. 2, 2017.
Lassoued, Mongi. “Comparative Study On Credit Risk In Islamic Banking Institutions: The Case Of Malaysia.” Quarterly Review Of Economics And Finance, Vol. 70, 2018. https://doi.org/10.1016/j.qref.2018.05.009.
Leon, Florian., And Weill, Laurent. “Islamic Banking Development And Access To Credit.” Pacific Basin Finance Journal, Vol. 52, 2018. https://doi.org/10.1016/j.pacfin. 2017.04.010.
Levine, R. Bank-Based and Market-Based Financial System. World Bank Publications, 1999.
Mehta, Cyrus R., and Patel, Nitin R. IBM SPSS Exact Tests. Cambridge: IBM Corporation, 2011.
Misman, Faridah Najuna., Bhatti, Ishaq., Lou, Weifang., Samsudin, Syamsyul., And Rahman, Nor Hadaliza Abd. “Islamic Banks Credit Risk: A Panel Study.” Procedia Economics And Finance, Vol. 31, No. 15, 2015. https://doi.org/10.1016/s2212-5671(15)01133-8.
Pasaribu, Pananda., And Mindosa, Bonnie. “The Bank Specific Determinants Of Loan Growth And Stability: Evidence From Indonesia.” Journal Of Indonesian Economy And Business, Vol. 36, No. 2, 2021. https://doi.org/10.22146/jieb.v36i2.1385.
Pokharel, Jhabindra. “Loan Growth And Bank Performance: A Panel ARDL Approach.” Management Dynamics, Vol. 23, No. 2, 2020. https://doi.org/10.3126/md.v23i2. 35812.
Purbayanto, Muhamad Anindya Hiroshi., Faturohman, Taufik., Yulianti, Yulianti., And Aliludin, Arson. “Do Islamic Banks In Indonesia Take Excessive Risk In Their Financing Activities?.” Journal Of Islamic Monetary Economics And Finance, Vol. 8, No. 1, 2022. https://doi.org/10.21098/jimf.v8i1.1431.
Rossi, Simone., Borroni, Mariarosa., Piva, Mariacristina., And Lippi, Andrea. “Abnormal Loan Growth And Bank Profitability: Some Evidence From The Recent Crisis.” International Journal Of Business And Management, Vol. 14, No. 7, 2019. https://doi.org/10.5539/ijbm.v14n7p36.
Safiullah, Md., And Shamsuddin, Abul. “Risk In Islamic Banking And Corporate Governance.” Pacific Basin Finance Journal, Vol. 47, 2018. https://doi.org/10.1016/j.pacfin. 2017.12.008.
Siddiqui, Anjum. “Financial Contracts, Risk And Performance Of Islamic Banking.” Managerial Finance, Vol. 34, No. 10, 2008. https://doi.org/10.1108/030743508108 91001.
Sobarsyah, Muhammad., Soedarmono, Wahyoe., Yudhi, Wahdi Salasi Apri., Trinugroho, Irwan., Warokka, Ari., And Pramono, Sigid Eko. “Loan Growth, Capitalization, And Credit Risk In Islamic Banking.” International Economics, Vol. 163, 2020. https://doi.org/10.1016/j.inteco.2020.02.001.
Toumi, Kaouther. “Islamic Ethics, Capital Structure And Profitability Of Banks; What Makes Islamic Banks Different?.” International Journal Of Islamic And Middle Eastern Finance And Management, Vol. 13, No. 1, 2020. https://doi.org/10.1108/IMEFM-05-2016-0061.
Trabelsi, Mohamed Ali., And Trad, Naama. “Profitability And Risk In Interest-Free Banking Industries: A Dynamic Panel Data Analysis.” International Journal Of Islamic And Middle Eastern Finance And Management, Vol. 10, No. 4, 2017. https://doi.org/10. 1108/IMEFM-05-2016-0070.
Zarrouk, Hajer., Jedidia, Khoutem Ben., And Moualhi, Mouna. “Is Islamic Bank Profitability Driven By Same Forces As Conventional Banks?.” International Journal Of Islamic And Middle Eastern Finance And Management, Vol. 9, No. 1, 2016. https://doi.org/ 10.1108/IMEFM-12-2014-0120.
Al-Wesabi, Hamid A. H., And Ahmad, Nor Hayati Bt. “Credit Risk Of Islamic Banks In GCC Countries.” International Journal Of Banking And Finance, Vol. 10, No. 2, 2013. https: //doi.org/10.32890/ijbf2013.10.2.8476.
Alzoubi, Tariq., And Obeidat, Muhanned. “How Size Influences The Credit Risk In Islamic Banks.” Cogent Business and Management, Vol. 7, No. 1, 2020. https://doi.org/10. 1080/23311975.2020.1811596.
Bhowmik, Probir Kumar., And Sarker, Niluthpaul. “Loan Growth And Bank Risk: Empirical Evidence From SAARC Countries.” Heliyon, Vol. 7, No. 5, 2021. https://doi.org/10. 1016/j.heliyon.2021.e07036.
Boadi, Boadi., Isaac, Isaac., Osarfo, Daniel., And Boadi, Perpetual. “Bank-Based And Market-Based Development And Economic Growth: An International Investigation.” Studies In Economics And Finance, Vol. 36, No. 3, 2019. https://doi.org/10.1108/SEF-12-2017-0346.
Bouheni, Faten Ben., Obeid, Hassan., And Margarint, Elena. "Nonperforming Loan Of European Islamic Banks Over The Economic Cycle." Annals Of Operations Research. Vol. 313, No. 2, 2022. https://doi.org/10.1007/s10479-021-04038-8.
Statistik, Badan Pusat. “Populasi Muslim.” https://bps.go.id/. Retrieved November 10, 2023.
Chamberlain, Trevor., Hidayat, Sutan., And Khokhar, Abdul Rahman. “Credit Risk In Islamic Banking: Evidence From The GCC.” Journal Of Islamic Accounting And Business Research, Vol. 11, No. 5, 2020. https://doi.org/10.1108/JIABR-09-2017-0133.
Dang, Van Dan. “The Effects Of Loan Growth On Bank Performance: Evidence From Vietnam.” Management Science Letters, Vol. 9, No. 6, 2019. https://doi.org/10.5267/ j.msl.2019.2.012.
Ebenezer, Olalere Oluwaseyi., Islam, Md Aminul., Junoh, Mohd Zukime Mat., And Yusoff, Wan Sallha. “Loan Growth, Bank Solvency And Firm Value: A Comparative Study Of Nigerian And Malaysian Commercial Banks.” Journal Of Reviews On Global Economics, Vol. 8, 2019. https://doi.org/10.6000/1929-7092.2019.08.32.
Fadila, Ihda. “September 2016, Pangsa Pasar Bank Syariah Tembus 5,3%.” https://finansial.bisnis.com/read/20160927/90/587449/september-2016-pangs a-pasar-bank-syariah-tembus-53. Retrieved October 22, 2023.
Foos, Daniel., Norden, Lars., And Weber, Martin. “Loan Growth And Riskiness Of Banks.” Journal Of Banking And Finance, Vol. 34, No. 12, 2010. https://doi.org/10.1016 /j.jbankfin.2010.06.007.
Ho, Tin H., Le, Tu D.Q., And Nguyen, Dat T. “Abnormal Loan Growth And Bank Risk-Taking In Vietnam: A Quantile Regression Approach.” Cogent Business And Management, Vol. 8, No. 1, 2021. https://doi.org/10.1080/23311975.2021.1908004.
Hosen, Mosharrof., Broni, Mohammed Yaw., And Uddin, Mohammad Nazim. “What Are The Bank Specific And Macroeconomic Elements Influence Non-Performing Loans In Bangladesh? Evidence From Conventional And Islamic Banks.” Green Finance, Vol. 2, No. 2, 2020. https://doi.org/10.3934/gf.2020012.
Ibrahim, Mansor H., And Rizvi, Syed Aun R. “Bank Lending, Deposits And Risk-Taking In Times Of Crisis: A Panel Analysis Of Islamic And Conventional Banks.” Emerging Markets Review, Vol. 35, 2018. https://doi.org/10.1016/j.ememar.2017.12.003.
Ilmi, Muhammad Bahrul. “The Analysis Of The Effect Of Islamic Financing And Labor Relationship Development Towards Non-Performing Financing In Islamic Banks.” Journal Of Islamic Accounting And Business Research, Vol. 34, No. 1, 2015. https://doi.org/10.1108/ JIABR-02-2015-0002.
Incekara, Ahmet., And Cetinkaya, Harun. “Credit Risk Management: A Panel Data Analysis On The Islamic Banks In Turkey.” Procedia Computer Science, Vol. 158, 2019. https://doi.org/10.1016/j.procs.2019.09.135.
Indonesia, Bank. Bank Indonesia Regulation Number 15/2/PBI/2013. Bank Indonesia, 2013.
Karim, Mastura Abdul., Hassan, M. Kabir., Hassan, Taufiq., And Mohamad, Shamsher. “Capital Adequacy And Lending And Deposit Behaviors Of Conventional And Islamic Banks.” Pacific Basin Finance Journal, Vol. 28, 2014. https://doi.org/10.1016/j. pacfin.2013.11.002.
Kashif, Muhammad., Iftikhar, Syed Faizan., And Iftikhar, Khurram. “Loan Growth And Bank Solvency: Evidence From The Pakistani Banking Sector.” Financial Innovation, Vol. 2, No. 1, 2016. https://doi.org/10.1186/s40854-016-0043-8.
Keuangan, Otoritas Jasa. “Laporan Publikasi.” https://www.ojk.go.id/id/, Retrieved November 10, 2023.
Kohler, Matthias. “Which Banks Are More Risky? The Impact Of Business Models On Bank Stability.” Journal Of Financial Stability, Vol. 16, No. 33, 2015. https://doi.org/ 10.1016/j.jfs.2014.02.005.
Kurnia, Riana Afliha Eka., Sawarjuwono, Tjiptohadi., Dan Herianingrum, Sri. “Manajemen Risiko Pembiayaan Untuk Mengantisipasi Kondisi Financial Distress Pada Bank Syariah.” Journal Of Islamic Economics Lariba, Vol. 3, No. 2, 2017.
Lassoued, Mongi. “Comparative Study On Credit Risk In Islamic Banking Institutions: The Case Of Malaysia.” Quarterly Review Of Economics And Finance, Vol. 70, 2018. https://doi.org/10.1016/j.qref.2018.05.009.
Leon, Florian., And Weill, Laurent. “Islamic Banking Development And Access To Credit.” Pacific Basin Finance Journal, Vol. 52, 2018. https://doi.org/10.1016/j.pacfin. 2017.04.010.
Levine, R. Bank-Based and Market-Based Financial System. World Bank Publications, 1999.
Mehta, Cyrus R., and Patel, Nitin R. IBM SPSS Exact Tests. Cambridge: IBM Corporation, 2011.
Misman, Faridah Najuna., Bhatti, Ishaq., Lou, Weifang., Samsudin, Syamsyul., And Rahman, Nor Hadaliza Abd. “Islamic Banks Credit Risk: A Panel Study.” Procedia Economics And Finance, Vol. 31, No. 15, 2015. https://doi.org/10.1016/s2212-5671(15)01133-8.
Pasaribu, Pananda., And Mindosa, Bonnie. “The Bank Specific Determinants Of Loan Growth And Stability: Evidence From Indonesia.” Journal Of Indonesian Economy And Business, Vol. 36, No. 2, 2021. https://doi.org/10.22146/jieb.v36i2.1385.
Pokharel, Jhabindra. “Loan Growth And Bank Performance: A Panel ARDL Approach.” Management Dynamics, Vol. 23, No. 2, 2020. https://doi.org/10.3126/md.v23i2. 35812.
Purbayanto, Muhamad Anindya Hiroshi., Faturohman, Taufik., Yulianti, Yulianti., And Aliludin, Arson. “Do Islamic Banks In Indonesia Take Excessive Risk In Their Financing Activities?.” Journal Of Islamic Monetary Economics And Finance, Vol. 8, No. 1, 2022. https://doi.org/10.21098/jimf.v8i1.1431.
Rossi, Simone., Borroni, Mariarosa., Piva, Mariacristina., And Lippi, Andrea. “Abnormal Loan Growth And Bank Profitability: Some Evidence From The Recent Crisis.” International Journal Of Business And Management, Vol. 14, No. 7, 2019. https://doi.org/10.5539/ijbm.v14n7p36.
Safiullah, Md., And Shamsuddin, Abul. “Risk In Islamic Banking And Corporate Governance.” Pacific Basin Finance Journal, Vol. 47, 2018. https://doi.org/10.1016/j.pacfin. 2017.12.008.
Siddiqui, Anjum. “Financial Contracts, Risk And Performance Of Islamic Banking.” Managerial Finance, Vol. 34, No. 10, 2008. https://doi.org/10.1108/030743508108 91001.
Sobarsyah, Muhammad., Soedarmono, Wahyoe., Yudhi, Wahdi Salasi Apri., Trinugroho, Irwan., Warokka, Ari., And Pramono, Sigid Eko. “Loan Growth, Capitalization, And Credit Risk In Islamic Banking.” International Economics, Vol. 163, 2020. https://doi.org/10.1016/j.inteco.2020.02.001.
Toumi, Kaouther. “Islamic Ethics, Capital Structure And Profitability Of Banks; What Makes Islamic Banks Different?.” International Journal Of Islamic And Middle Eastern Finance And Management, Vol. 13, No. 1, 2020. https://doi.org/10.1108/IMEFM-05-2016-0061.
Trabelsi, Mohamed Ali., And Trad, Naama. “Profitability And Risk In Interest-Free Banking Industries: A Dynamic Panel Data Analysis.” International Journal Of Islamic And Middle Eastern Finance And Management, Vol. 10, No. 4, 2017. https://doi.org/10. 1108/IMEFM-05-2016-0070.
Zarrouk, Hajer., Jedidia, Khoutem Ben., And Moualhi, Mouna. “Is Islamic Bank Profitability Driven By Same Forces As Conventional Banks?.” International Journal Of Islamic And Middle Eastern Finance And Management, Vol. 9, No. 1, 2016. https://doi.org/ 10.1108/IMEFM-12-2014-0120.
Downloads
Published
2024-04-17
Issue
Section
Articles
License
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.
