Development of Islamic Banking Financial Performance and SMEs Financing in Indonesia

Abstract

The source of capital for SMEs is generally obtained from banks. This research aims to determine the relationship of financial performance in Islamic banking in the distribution of funding for SMEs. This research was conducted to determine whether the improved financial performance of Islamic banking to become a cornerstone in the SME sector financing and the variables that affect the financial performance of Islamic banking. This research is based on secondary data with monthly time series data 2009: 01 to 2013: 12 of the annual reports published by Bank of Indonesia, Data analysis uses the Vector Autoregression (VAR) estimation method. The results showed that the equality of each Islamic banking financial performance variable (BOPO, FDR and NPF) in Islamic Commercial Banks (BUS) as endogenous variables in the long term was positively and significantly affected by ROA at the 5% real level. While the PYD equation as an endogenous variable in the long term is not significantly affected by ROA. But in the short term, all exogenous variables from the BOPO, FDR and NPF equations are not significant. The BOPO, FDR, NPF and PYD equations in BPRS as endogenous variables in the long run have a significant effect on ROA at the 5% real level. But in the short term, all exogenous variables from the BOPO, FDR, NPF and PYD equations are not significant, except for the NPF variable in the BOPO, PYD and FDR variables themselves are significan