The Influence of Internal Bank Financial Ratios on Murabaha Financing: Evidence from Indonesian Islamic Commercial Banks

Abstract

The main objective of this study is to investigate how internal bank financial ratios impact Murabaha financing in Indonesian Islamic banks. We examine the effects of the financing bank ratios as assessed by the financing to deposit ratio, capital adequacy ratio, Non-performing financing, and return on assets on Murabaha finance in Indonesian Shariah banks. A sample of 14 from 48 Indonesian commercial Islamic banks was used in this study. The sampling method employed a random-sampling technique. This study showed that Indonesian Islamic commercial banks' financing-to-deposit ratio significantly affected the financing of Murabaha. However, the Indonesian Islamic commercial banks that provide Murabaha financing have been severely impacted by the capital adequacy ratio, Non-performing financing, and return on assets. This study suggests that the assessment of the capital adequacy ratio be improved by appropriately adjusting the inclusion of violations in accordance with the circumstances of each country. With the use of the study's findings, it is hoped that potential investors will be inspired to take the amount of money being offered into account when choosing their investments. It is also anticipated that these factors will be considered as input for how Shariah commercial banks can affect Murabaha financing, so that Shariah commercial banks can be more cautious when applying Shariah accounting principles, particularly Murabaha financing, in a way that Shariah accounting standards are not improperly violated.