Analysis of The Influence of Liquidity, Credit and Operational Risk, in Indonesian Islamic Bank’s Financing for The Period 2007-2013

Ousmane  Diallo; Tettet  Fitrijanti; Nanny Dewi  Tanzil

Ousmane Diallo Cheikh Anta Diop University of Dakar
Tettet Fitrijanti Universitas Padjadjaran
Nanny Dewi Tanzil Universitas Padjadjaran

Keywords: Liquidity, Credit, Operational Risk, Indonesian Islamic Bank’s

Abstract

The purpose of this paper is to analyze the influence of credit, liquidity and operational risks in six Indonesian’s islamic banking financing products namely mudharabah, musyarakah, murabahah, istishna, ijarah and qardh, in order to try to discover whether or not Indonesian islamic banking is based on the “risk-sharing” system. This paper relies on a fixed effect model test based on the panel data analysis method, focusing on the period from 2007 to 2013. The research is an exploratory and descriptive study of all the Indonesian islamic banks that were operating in 2013. The results of this study show that the Islamic banking system in Indonesia truly has banking products based on “risk-sharing.” We found out that credit, operational and liquidity risks as a whole, have significant influence on mudarabah, musyarakah, murabahah, istishna, ijarah and qardh based financing. There is a correlation between the credit risk and mudarabah based financing, and no causal relationship between the credit risk and musharaka, murabahah, ijarah, istishna and qardh based financing. There is also correlation between the operational risk and mudarabah and murabahah based financing, and no causal relationship between the operational risk and musharaka, istishna, ijarah and qardh based financing. There is correlation between the liquidity risk and istishna based financing, and no causal relationship between the liquidity risk and musharaka, mudarabah, murabahah, ijarah and qardh based financing. A major implication of this study is the fact that there is no causal relationship between the credit risk and musharakah based financing, which is the mode of financing where the islamic bank shares the risk with its clients, but there is an influence of credit risk toward mudarabah mode financing, a financing mode where the Islamic bank bears all the risk. These findings can lead us to conclude that the Indonesian Islamic banking sector is based on the “risk sharing” system.

Author Biographies

Ousmane Diallo, Cheikh Anta Diop University of Dakar

He has got a Master Degree (2006) in Economic Analysis and Economic Policy, and a master degree in Logistics and Transportation, from Cheikh Anta Diop University of Dakar, a Master degree in Accounting (2014) with a speciality in Islamic Banking and Finance from Padjadjaran University (Unpad), Bandung, Indonesia.

Tettet Fitrijanti, Universitas Padjadjaran

Secretary the Study Program of Doctoral in Accounting, Faculty of Economic and Business, Padjadjaran University (Unpad), Bandung, and a lecturer at the same institution. She earned her Doctoral Degree in Financial Management from Padjadjaran University; and her Master Degree. from Gadjah Mada University; and her Bachelor Degree Accounting and Finance from Padjadjaran University.

Nanny Dewi Tanzil, Universitas Padjadjaran

Head of Undergraduate Program in Accountancy at Padjadjaran University (Unpad), Bandung, Indonesia. Currently she is also part of the Risk Monitoring Committee Member of PT Bank Mizuho, and a Audit Committee Member of PT Rabobank International Indonesia. She earned her Dr. (2006) in Finance from Padjadjaran University, and her Master (1992) in Accountancy from Dept. of Accountancy University of Wollongong, Australia; and her Bachelor Degree (1987) in Accounting at Padjadjaran University. She has written articles and papers and has presented her research works in international as well as national conference/seminars regarding accounting, corporate finance.

References

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