DO BUSINESS MODELS IN ISLAMIC BANK MATTER? THE EFFECT OF BUSINESS MODELS ON BANK PERFORMANCE AND STABILITY

• Main Author: Nadhilah, Fakhrana
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/57957
• Institution: Institut Teknologi Bandung

Indonesia as one of the countries with the largest Muslim population in the world, prioritizes Sharia principles in various elements of society's lives, including in transactions using banks as financial intermediary institutions. Islamic banks in Indonesia have become one of the highlights of the problem where of the 180 million Muslim population in Indonesia, only about 30 million are customers of Islamic banks. Meanwhile, there is previous studies showing that Islamic banks are more stable in times of crisis than conventional banks, which should help increase public interest in switching to Islamic banks. To prove the results of this research, the author tries to analyze the effect of the Islamic bank business model on the performance and stability of the bank. Because Islamic banks in Indonesia have the potential to grow by looking at the increasing number of Islamic banks in Indonesia. In addition, this study also aims to provide additional knowledge to banks that are useful for determining bank strategies in the future. In this study, the authors use a dynamic cluster method, namely K-means Longitudinal to examine the effect of business models in Islamic Banks on bank performance and stability. This research uses a method to cluster dynamically, namely K-means Longitudinal, to identify the business model of Islamic banks from a sample of 31 Islamic Banks in Indonesia from 2010Q1 to 2019Q3. This research uses Return on Asset (ROA) and Return on Equity (ROE) to measure bank performance and Z-index and Loss Provisions to measure bank stability. The findings in this study indicate that banks with Profitsharing business models and Margin banks have a more positive impact on ROA compared to the Funded banks. While the results of the study show that there is no difference in the effect of the business model on stability. This study also confirms the literature on fee-based products where fee-based products can increase bank profitability. Meanwhile, the Mudharabah Funding product can reduce bank performance and stability