The Role of Mudharabah and Musharakah Financing in Enhancing the Sustainable Performance of Islamic Banks in Indonesia: Bank-Specific and Macroeconomic Factors as Moderation
Kiki Yulia Nurul Ramadhani1, a), Dian Imanina Burhany 1, b), Iwan Setiawan1, c)

Politeknik Negeri Bandung

Abstract

Islamic banking plays a pivotal role in supporting sustainable development when it demonstrates optimal performance. Over the past 10 years, Indonesian Islamic banking has shown great fluctuative performance. The bank^s operating revenue derived from financing is the key source of the Islamic bank^s performance. Profit-sharing financing, consisting of mudharabah and musharakah, distinguishes Islamic banks from their conventional counterparts, but the distribution has not been ideal up to this point. This study, therefore, attempts to investigate the role of mudharabah and musharakah in enhancing the performance of Islamic banks in Indonesia, using bank-specific factors (non-performing financing-NPF) and macroeconomic factors (inflation) as moderating variables. By employing 12 Indonesian Islamic banks operating in 2013-2022 as the research sample, this study analyzed the data using SEM-PLS in the WarpPLS 8.0 application. The results reveal that mudharabah financing does not have any significant influence on Islamic bank performance while musharakah demonstrates a significant positive impact. Further, NPF moderates the effect of mudharabah and musharakah financing on Islamic bank performance while inflation does not.

Keywords: Performance, Mudharabah Financing, Musyarakah Financing, Non Performing Financing, Inflation

Topic: Sustainable development