Murabahah Financing, Financing to Deposit Ratio, and Profitability: The Conditioning Role of Non-Performing Financing in Indonesian Islamic Commercial Banks

Authors

• Rifqi Badriansyah Wijaya, Universitas PadjajaranFollow
• Srihadi Winarningsih, Universitas PadjajaranFollow

Abstract

This study examines whether non-performing financing (NPF) conditions the relationships between murabahah financing, the Financing to Deposit Ratio (FDR), and the profitability of Indonesian Islamic Commercial Banks. Using a balanced quarterly panel of 10 banks over 2021Q1–2025Q4 (200 bank-quarters), we estimate two-way (bank and quarter) fixed-effects moderated regressions in which murabahah financing is scaled by total assets, the interacting variables are mean-centred, and inference relies on Driscoll–Kraay standard errors and a wild cluster bootstrap. At the sample-mean level of NPF, neither murabahah intensity nor FDR is significantly associated with return on assets (ROA). The murabahah–profitability relationship is, however, conditional on financing quality: the murabahah × NPF interaction is negative (β = −0.042; Driscoll–Kraay p < 0.001; wild bootstrap p = 0.041), so the marginal association of murabahah intensity with ROA is indistinguishable from zero below an NPF ratio of about 3.1% and significantly negative above it, a region containing about one-third of bank-quarters (−0.12 percentage points of ROA per percentage point of murabahah intensity at the 90th percentile of NPF). NPF does not significantly condition the FDR–profitability relationship. The murabahah result survives competing interactions, winsorisation, random-effects estimation, the original log-level measure, and the exclusion of each bank in turn, but weakens when regressors are lagged by one quarter, which is consistent with a largely contemporaneous provisioning channel. Because NPF is measured on total financing, the evidence concerns portfolio-level financing risk rather than murabahah-specific default. The results indicate that the earnings of murabahah-intensive banks are the most exposed to deteriorating financing quality and that murabahah growth is not, by itself, associated with higher profitability.

Recommended Citation

Wijaya, Rifqi Badriansyah and Winarningsih, Srihadi (2026) "Murabahah Financing, Financing to Deposit Ratio, and Profitability: The Conditioning Role of Non-Performing Financing in Indonesian Islamic Commercial Banks," Journal of Accounting Auditing and Business: Vol. 9: No. 2, Article 2.
Available at: https://journal.unpad.ac.id/jaab/vol9/iss2/2