Proceedings of the International Seminar of Science and Applied Technology (ISSAT 2020)

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The Effect of Economic Condition and Banking Policy on Non-Performing Financing and Profitability: Evidence from Islamic Rural Banks in Indonesia

Authors
M. Wanri Wahyudin, Ira Novianty, Dian Imanina Burhany
Corresponding Author
M. Wanri Wahyudin
Available Online 22 December 2020.
DOI
10.2991/aer.k.201221.090How to use a DOI?
Keywords
Non-Performing Financing, BI-rate, Inflation, Profitability
Abstract

Islamic rural bank is a type of banks in Indonesia with a high level of non-performing financing. It is an important issue because will ultimately affect profit as the main goal. This study aims to examine the factors that affect non-performing financing (NPF) at Islamic rural banks in Indonesia, those are economic conditions consisting of gross domestic product (GDP), Bank Indonesia-rate (BI-rate), and inflation, and banking. The policy consists of financial to deposit ratio (FDR) and capital adequacy ratio (CAR), and their impact on profitability. The population of this study is all Islamic rural banks in Indonesia with a sample of banks operating during 2014-2018. Panel data is analyzed using the PLS-SEM tool. The result shows that inflation as well as FDR, have a positive effect on NPF, while GDP, BI-rate, and CAR have no effect on NPF. Results also indicate that NPF has a negative effect on profitability. These results can be a consideration for bank management to control financial and pay attention to rising inflation, to overcome non-performing financing, because these two factors can be signals in control and managing to develop the profit.

Copyright
© 2020, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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Volume Title
Proceedings of the International Seminar of Science and Applied Technology (ISSAT 2020)
Series
Advances in Engineering Research
Publication Date
22 December 2020
ISBN
10.2991/aer.k.201221.090
ISSN
2352-5401
DOI
10.2991/aer.k.201221.090How to use a DOI?
Copyright
© 2020, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

Cite this article

risenwbib
TY  - CONF
AU  - M. Wanri Wahyudin
AU  - Ira Novianty
AU  - Dian Imanina Burhany
PY  - 2020
DA  - 2020/12/22
TI  - The Effect of Economic Condition and Banking Policy on Non-Performing Financing and Profitability: Evidence from Islamic Rural Banks in Indonesia
BT  - Proceedings of the International Seminar of Science and Applied Technology (ISSAT 2020)
PB  - Atlantis Press
SP  - 545
EP  - 551
SN  - 2352-5401
UR  - https://doi.org/10.2991/aer.k.201221.090
DO  - 10.2991/aer.k.201221.090
ID  - Wahyudin2020
ER  -