THE INFLUENCE OF SUSTAINABILITY PRACTICE AND FINANCIAL PERFORMANCE TO PROFITABILITY ON ISLAMIC BANKING IN INDONESIA

• Main Author: Arief Pratwi, Lina
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/72848
• Institution: Institut Teknologi Bandung

Indonesia is one of the countries with the growth of Islamic banking that has increased in recent years and has also participated in the SDGs. To support the SDGs, the Financial Services Authority (OJK), through OJK Regulation Number 51 / POJK.03 / 2017 concerning sustainable finance, requires financial institutions, including Islamic banking, to implement sustainability practices. In order to maintain its financial performance, Islamic banking also needs to assess whether the implementation of sustainability practices can affect financial performance or not, especially in profitability. This study uses a generalized least-square method to find the relationship between sustainability implementation and profitability in Islamic banking from 2017-20201 with 13 samples of Islamic banks listed in the Islamic Banking Statistics report at the Financial Services Authority (OJK) Indonesia. This study uses using R Program to compute the data. In this study, the sustainability index is captured using three essential dimensions of sustainability practices by Jan et al. (2019). It has three dimensions in sustainability practices: economic, environmental, and social. This study reveals that sustainability practices have a significant influence on profitability. However, the overall value of disclosure of sustainability practices in Indonesia is 29% of one hundred percent. For this reason, there is a need to increase sustainability practices and reporting. In addition, the variables CAR, CIR and age also have a significant relationship with profitability. Banks must also increase CAR and minimize CIR to get a high profitability value and improve the bank.