Factors influencing non-performing financing (NPF) in sharia banking

Hardana, Ali and Zein, Aliman Syahuri and Johanna, Anne and Avinash, Buschhaus (2023) Factors influencing non-performing financing (NPF) in sharia banking. Journal Markcount Finance, 1 (2). pp. 87-97. ISSN 2986-9455

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Abstract

The risk of financing is caused by the customer's failure to fulfill their obligations. Non-performing financing (NPF) is a representation of financing risk that is channeled and has a direct impact on bank profitability. The value of NPF tends to increase annually with a value that is already close to the maximum limit set by Bank Indonesia of 5 percent. This condition can lead to the inefficiency of the banking system and, in the long run, will impact the Bank's sustainability. Therefore, the analysis of NPF factors should be conducted as a preventive measure and a risk controller of business activities. This research analyzes the factors influencing NPF at sharia banking (BUS) using quarterly data from the first quarter of 2012 until the third quarter of 2016. The method used in this research is panel data analysis. The result of the investigation shows that the factors influencing NPF negatively and significantly are a ratio of revenue sharing financing (RR), Return on assets (ROA), inflation, Capital Adequacy Ratio (CAR), and Bank size. At the same time, Gross Domestic Product (GDP) and Operating Cost to Operating Income (BOPO) have a significant positive effect

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