Determinants of Non-performing Financing of Sharia Banks in Southern Sumatra, Indonesia

  • Abid Djazuli, Mister Candera, Dinarossi Utami

Abstract

Non-performing Financing (NPF) is one of the indicators of bank soundness level. The less the NPF rates the better the banks are. Along with the bank rating, the trade-off increases public confidence in conducting investments in banks. Conversely, if the NPF rate is high then people will reconsider investing in the banks. In sharia banks in Southern Sumatra region, the NPF rates are identified quite high. It is higher than or above 5%. Inflation, Bank Indonesia (BI) Rate, and Exchange are considered as the independent variables while nonperforming financing as the dependent variable. Asset is as a moderating variable. The data are obtained from Financing Authority and Bank Indonesia. Moderation Regression (MRA) is a model of analysis applied in this current study. The results show that inflation has a negative and significant effect on NPF. While the asset as an independent variable and as a moderating variable significantly strengthens the effect. BI Rate has a negative and significant effect on NPF. Asset variable, it is significant as an independent variable and as a moderating variable. Asset variables can strengthen the effect of the BI Rate on NPF. Exchange rates have a positive and significant effect on NPF. The asset variable is significant both as an independent variable and as a moderating variable, but its moderation weakens the effect of the exchange rate on NPF.

Published
2020-05-01