Technology Investment Intensity and Financial Performance of Islamic Banks in Indonesia (Business Innovation Management and Entrepreneurship Journal (BIMANTARA))

Summary

• The study uses 120 bank-year observations from 10 Islamic commercial banks in Indonesia over 2012–2022.p.1
• Murabaha has the highest mean financing proportion (37.792%), followed by musharakah (15.319%).p.7
• Mudarabah, ijarah and istisna have lower mean proportions of 1.324%, 2.868% and 3.107%, respectively.p.7
• Mean ROA is 0.0192 (approximately 1.92%) and mean TII is 0.0030 (approximately 0.30% of total assets).p.7
• Islamic bank financing is projected to grow by 9.31% YoY.p.2
• Musharakah, murabaha and ijarah financing have positive and significant effects on ROA, whereas mudarabah and istisna have no significant direct effects.p.1

Key insights

1. Musharakah shows substantial variation across banks and years (standard deviation 20.989%).p.7
2. Correlations are positive between MUSH and ROA (0.273), MUDH and TII (0.298), and TII and ROA (0.341).p.7
3. Technology investment intensity does not mediate the musharakah-ROA relationship but significantly mediates the mudarabah-ROA relationship.p.9
4. Mudarabah has a positive but statistically insignificant direct effect on ROA.p.8