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The powerlessness of mudharabah instrument in Indonesian Islamic banking

Author

Listed:
  • Muchlis Yahya
  • Agus Eko Sujianto
  • Edy Yusuf Agunggunanto
  • Johan Arifin
  • Syaparudin

Abstract

The objective of this study is to analyse the powerlessness of profit sharing payment with the mudharabah instrument in Indonesian Islamic banking. The factors that could affect the powerlessness are inflation, interest rate, mudharib bankrupt potency (NPF), operational costs, and workload with fixed payment. Using time series data that consist of 60 months from 2014 to 2018, this study shows that the spirit of implementing mudharabah contract from the side of financing was excessive as indicated by the constant value 47.750. In the process, it is loosened due to inflation, interest rate, mudharib bankrupt potency (NPF), operational cost and workload with fixed payment model. In the future, it is necessary to synchronise the revenue model and cost. If the revenue from the financing side used profit sharing payment model, then all the production costs (wage and rent) should be applied the profit sharing payment model instead of fixed payments.

Suggested Citation

  • Muchlis Yahya & Agus Eko Sujianto & Edy Yusuf Agunggunanto & Johan Arifin & Syaparudin, 2023. "The powerlessness of mudharabah instrument in Indonesian Islamic banking," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 17(4), pages 571-585.
    • Handle: RePEc:ids:ijepee:v:17:y:2023:i:4:p:571-585
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