Islamic banks should prioritize CAR management

Oct 13, 2025 by magicalceylontours.com 61 views

The Effects of CAR, NPF, and FDR on Return Sharing for Mudharabah Deposits in Sharia Banking in Indonesia (2012-2016)

Introduction

In the realm of Islamic banking, Mudharabah deposit is a crucial component that plays a significant role in the financial health of Sharia banking companies in Indonesia. The return of Mudharabah deposit revenue sharing is a vital aspect that affects the profitability of these institutions. However, previous studies have yielded varying results, highlighting the need for further research to test existing theories regarding the return of Mudharabah deposits. This study aims to investigate the influence of Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), and Non-Performing Financing (NPF) on Mudharabah Deposit Sharing Return in Sharia Banking Companies in Indonesia during the 2012 to 2016 period, with profitability as a moderating variable.

Methodology

The population of this study consisted of 11 Islamic banking companies in Indonesia. A purposive sampling method was employed, resulting in 5 sample companies for 5 years of observation (2012-2016). A total of 100 observations were collected from the quarterly reports of these companies. The data used in this study was obtained from the Bank Indonesia website and analyzed using descriptive statistical techniques and multiple regression analysis.

Results

The results of this study showed that partially, only CAR had a significant influence on the return of Mudharabah deposit. Conversely, when viewed simultaneously, CAR, FDR, and NPF together significantly influenced the return of Mudharabah deposit. However, moderating testing revealed that profitability did not function as a moderating variable in the relationship between CAR, FDR, or NPF to the return of Mudharabah deposit sharing.

Additional Analysis and Explanation

The Effect of CAR on the Return of Mudharabah Deposit Revenue Sharing

The level of capital adequacy owned by Islamic banks is closely related to the ability of banks to provide benefits to customers. The higher the CAR, the more capable the bank meets its financial obligations and manages risk, which in turn can increase customer confidence to place funds on Mudharabah deposit products. This is because a higher CAR indicates a bank's ability to absorb potential losses, thereby reducing the risk of default and increasing the likelihood of profitable returns.

The Role of FDR in the Return of Mudharabah Deposit Revenue Sharing

FDR, which reflects the proportion of financing to total deposits, also plays an important role in the return of Mudharabah deposit revenue sharing. Although the results showed that the FDR had no partial significant effect, it is essential to note that good FDR management can encourage business growth and bank profit potential. In other words, an efficient bank in the management of assets and liabilities will tend to offer competitive returns to customers.

The Impact of NPF on the Return of Mudharabah Deposit Revenue Sharing

Conversely, NPF as an indicator of financing quality shows that problematic financing will reduce profits and, therefore, can negatively affect profit sharing returns. Although the results of this study state that the NPF does not have a partial significant effect, it is crucial to oversee this ratio to remain within reasonable limits to maintain the financial health of Islamic banks.

The Moderating Effect of Profitability on the Relationship between CAR, FDR, and NPF to the Return of Mudharabah Deposit Returns

The results showing that profitability does not moderate the relationship between the three variables to the return of Mudharabah deposit returns may reflect that other factors such as operational efficiency and risk management are more important in determining these returns. This provides lessons for bank managers not only to focus on profitability but also on the stability and overall performance of the bank.

Conclusion

This research provides valuable insights for Islamic banking management and investors in understanding the factors that influence the return of Mudharabah deposit. By paying attention to these factors, Islamic banks can formulate better strategies in attracting customers and increasing their competitiveness in the market. The findings of this study highlight the importance of CAR, FDR, and NPF in determining the return of Mudharabah deposit revenue sharing, and the need for bank managers to focus on operational efficiency and risk management to ensure the stability and overall performance of the bank.

Recommendations

Based on the findings of this study, the following recommendations are made:

Islamic banks should prioritize CAR management: Islamic banks should focus on maintaining a high CAR to ensure the financial stability and soundness of the bank.
FDR management is crucial: Islamic banks should manage their FDR efficiently to encourage business growth and bank profit potential.
NPF should be monitored closely: Islamic banks should oversee their NPF ratio to remain within reasonable limits to maintain the financial health of the bank.
Operational efficiency and risk management are essential: Islamic banks should focus on operational efficiency and risk management to ensure the stability and overall performance of the bank.

By implementing these recommendations, Islamic banks can improve their competitiveness in the market and provide better returns to their customers.
Frequently Asked Questions (FAQs) about the Effects of CAR, NPF, and FDR on Return Sharing for Mudharabah Deposits in Sharia Banking in Indonesia (2012-2016)

Q: What is the main objective of this study?

A: The main objective of this study is to investigate the influence of Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), and Non-Performing Financing (NPF) on Mudharabah Deposit Sharing Return in Sharia Banking Companies in Indonesia during the 2012 to 2016 period, with profitability as a moderating variable.

Q: What is the significance of this study?

A: This study is significant because it provides valuable insights for Islamic banking management and investors in understanding the factors that influence the return of Mudharabah deposit. By paying attention to these factors, Islamic banks can formulate better strategies in attracting customers and increasing their competitiveness in the market.

Q: What are the key findings of this study?

A: The key findings of this study are:

Partially, only CAR has a significant influence on the return of Mudharabah deposit.
When viewed simultaneously, CAR, FDR, and NPF together significantly influence the return of Mudharabah deposit.
Profitability does not function as a moderating variable in the relationship between CAR, FDR, or NPF to the return of Mudharabah deposit sharing.

Q: What is the role of CAR in the return of Mudharabah deposit revenue sharing?

A: The level of capital adequacy owned by Islamic banks is closely related to the ability of banks to provide benefits to customers. The higher the CAR, the more capable the bank meets its financial obligations and manages risk, which in turn can increase customer confidence to place funds on Mudharabah deposit products.

Q: What is the impact of NPF on the return of Mudharabah deposit revenue sharing?

A: NPF as an indicator of financing quality shows that problematic financing will reduce profits and, therefore, can negatively affect profit sharing returns. Although the results of this study state that the NPF does not have a partial significant effect, it is crucial to oversee this ratio to remain within reasonable limits to maintain the financial health of Islamic banks.

Q: What are the implications of this study for Islamic banking management and investors?

A: The findings of this study highlight the importance of CAR, FDR, and NPF in determining the return of Mudharabah deposit revenue sharing, and the need for bank managers to focus on operational efficiency and risk management to ensure the stability and overall performance of the bank.

Q: What are the recommendations of this study for Islamic banking management and investors?

A: Based on the findings of this study, the following recommendations are made:

Islamic banks should prioritize CAR management: Islamic banks should focus on maintaining a high CAR to ensure the financial stability and soundness of the bank.
FDR management is crucial: Islamic banks should manage their FDR efficiently to encourage business growth and bank profit potential.
NPF should be monitored closely: Islamic banks should oversee their NPF ratio to remain within reasonable limits to maintain the financial health of the bank.
Operational efficiency and risk management are essential: Islamic banks should focus on operational efficiency and risk management to ensure the stability and overall performance of the bank.

By implementing these recommendations, Islamic banks can improve their competitiveness in the market and provide better returns to their customers.