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Against Profitability in
Islamic Bank
Created By:
Aya Ramadhani Toba
19012117 3E
Background
Islamic bank or better known by the name of Bank Syariah stepped in Indonesia
market in 1988 and become more permanent in 1991 with Bank Muamalat Indonesia
as Majelis Ulama Indonesia (MUI) banking team. And in 2014 Indonesia has 11
islamic bank and 24 Business Unit Syariah. The difference between Islamic bank and
other conventional bank is on its system. Islamic bank used a banking system that
based on the principles of Islamic law and guided by Islamic economics. Islamic law
is prohibits acceptance of specific interest or fees for loans of money or known as
riba. To prevent riba Islamic bank implements on sharing of profit and loss equally on
its system.
The growth of Islamic bank is getting better each year that makes a lot of
conventional bank make a business unit syariah or make a branch of bank syariah. In
the last 5 years, the growth of Islamic bank in Indonesia consistent in the range of 3845% years on year. In the terms of the number of account in Islamic bank also
increased 28% from 12.5 million to 16 million accounts.
One of the key that islamic bank also getting better each year is the bank ability to
generates profit. There are certain aspects to measure the profit of the bank, for
example, the quality of assets, investment, and liquidity. Assessment of capital is
intended to assess the adequacy of bank capital in securing positions and risk
exposures of anticipating exposure the risks that will arise. Asset quality assessment is
intended to assess the condition of the bank's assets, including the anticipation over
the risk of nonpayment of financing that will appear. And last, Bank liquidity viewed
from two sides on a balance sheet the bank. As an institution, banks must be able to
perform its function as accommodating funds and as distributor funds to obtain
reasonable profit. On the credit side, bank should be able to fulfill an obligation to
customers every loan of those who were in a bank drawn. On the side of an asset,
bank must agree to the disbursement of credits that has been promised.
1.2
The profitability of the bank also affect by its liquidity. And the condition of the
liquidity of Islamic bank in Indonesia could be categorized as high if viewed by its
FDR. If its going higher there will be an effect to the profitability of the bank.
Therefore the research want to fill a gap in knowledge of what the condition of
liquidity in Indonesias Islamic bank and the reason of Islamic banks liquidity goes
higher; and understanding with regard to managing liquidity risk to prevent the
negative effect that will affect the profitability of the bank.
1.3
Research Objective