The Effect Covid-19 and Sectoral Financing on Islamic Bank Profitability in Indonesia

Mohammad Zen Nasrudin Fajri(1*), Adamu Abubakar Muhammad(2), Khoirul Umam(3), Lila Prisilia Putri(4), Mohammad Ali Ramadhan(5)

(1) Universitas Darussalam Gontor
(2) Federal University of Kashere
(3) Universitas Darussalam Gontor
(4) Universitas Darussalam Gontor
(5) Universitas Darussalam Gontor
(*) Corresponding Author


COVID-19 pandemic has created a new economic crisis worldwide. Islamic Bank which was reportedly resilient against the financial crisis is expected to be stable in this period. Apart from that, Islamic Bank has channeled financing fund to various business sectors with different portions leading to a question whether they have different impact on Bank. This paper aims to discover the impact of COVID-19 pandemic and financing to business sectors on Islamic Bank profitability. An ARDL approach is employed for analysis. The result of the study shows that COVID-19 pandemic has a negative relationship with Islamic Bank profitability in the long-run. Furthermore, financing to transportation, warehousing and communication sectors is associated with higher profitability in the short-run. On the other hand, financing to wholesale and retail trade sectors hurt Islamic Bank profitability. Based on this result, it is suggested that Government impose some measures in stabilizing Islamic Bank’s performance during COVID-19 pandemic. In addition, Islamic Banks are expected to make adjustment on financing to business sectors ratio accordingly in order to maintain the profitability of Islamic Bank.


COVID-19; Profitability; Islamic Bank; Business sector; ARDL

Full Text:



Afkar, T. (2017). Influence Anaysisi of Mudharabah Financing and Qardh Financing to The Profitanility of Islamic Banking in Indonesia. Asian Journal of Innovation and Entrepreneurship, 02(03), 340–351.

Allais, M., & Hagen, G. M. (Eds.). (2013), “Expected utility hypotheses and the Allais paradox: Contemporary discussions of the decisions under uncertainty with Allais' rejoinder,” (Vol. 21). Springer Science & Business Media.

Almonifi, Y. S. A., Rehman, S. ul, & Gulzar, R. (2021). The COVID-19 Pandemic Effect on the Performance of the Islamic Banking Sector in KSA: An Empirical Study of Al Rajhi Bank. International Journal of Management, 12(4), 533–547.

Ascarya, & Yumanita, D. (2005). Mencari Solusi Rendahnya Pembiayaan Bagi Hasil di Perbankan Syariah Indonesia. Buletin Ekonomi Moneter Dan Perbankan, Juni, 7–43.

Beck, T., 2020. Finance in the times of coronavirus. In Baldwin, R. and di Mauro, B.W. (Eds.). Economics in the Time of COVID-19. Centre for Economic Policy Research, London. Available at: [Accessed 7 July. 2020]

Ben Khediri, K., Ben Khediri, K., & Hichem, B. K. (2009). Determinants of Islamic bank profitability in the MENA region. International Journal of Monetary Economics and Finance, 2(3–4), 409–426.

BI. 2020. ‘BI 7-Day Reverse Repo Rate (BI7DRR)’. BI

Chapra, M. U. (2011). The Global Financial Crisis: Can Islamic Finance Help? Islamic Economics and Finance, 135–142.

Dickey, D. A., & Fuller, W. A. (1979). Distribution of the Estimators for Autoregressive Time Series with a Unit Root Distribution of the Estimators for Autoregressive Time Series With a Unit Root. Journal of the American Statistical Association, 76(366a), 37–41.

Elnahass, M., Trinh, V. Q., & Li, T. (2021). Journal of International Financial Markets , Institutions & Money Global banking stability in the shadow of Covid-19 outbreak. Journal of International Financial Markets, Institutions & Money, 72, 101322.

Engle, R. F., & Granger, C. W. J. (1987). Linkage Study of Gamma Globulin Groups. Econometrica, 55(2), 251–276.

Fadrul, & Asyari, H. (2018). Faktor-Faktor yang Mempengaruhi Profitabilitas Bank Syariah di indonesia Tahun 2011-2015. Jurnal Ilmiah Cano Ekonomos, 7(1), 25–38.

Goodell, J. W. (2020). COVID-19 and finance : Agendas for future research. Finance Research Letters, 35(April).

Halicioglu, F. (2007). The demand for new housing in Turkey : an application of ARDL model Ferda Halicioglu. Global Business and Economics Review, 9(1), 62–74.

Handayani, E., Tubastuvi, N., & Fitriati, A. (2019). The Determinants of Islamic Commercial Bank Profitability in Indonesia during 2012-2018. The International Journal of Business Management and Technology, 3(5), 225–236.

Hassan, M. K., Rabbani, M. R., & Ali, M. A. M. (2020). Challenges for the Islamic Finance and banking in post COVID era and the role of Fintech M. Kabir Hassan 1 , Mustafa Raza Rabbani 2 and Mahmood Asad Mohd. Ali 3. Journal of Economic Cooperation and Development, 41(3), 93–116.

Izhar, H., & Asutay, M. (2007). Estimating the Profitability of Islamic Banking: Evidence from Bank Muamalat Indonesia. Review of Islamic Economics, 11(2), 17–29.

Johansen, S., & Exogeneity, T. W. (1991). Testing Weak Exogeneity and the Order of Cointegration in UK Money Demand Data.

Keuangan, O. J. (2020). Statistik Perbankan Syariah.

McKibbin, W. J., & Fernando, R. (2020). The Global Macroeconomic Impacts of COVID-19: Seven Scenarios. CAMA Working Paper 19/2020 February 2020.

Nugroho, L., Utami, W., & Meiwanto Doktoralina, C. (2020). Covid-19 and the Potency of Disruption on the Islamic Banking Performance (Indonesia Cases). Inernational Journal of Economics and Business Applied, 1(1), 11–25.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds Testing Approaches to The Analysis. Journal of Applied Economietrics, 326(February), 289–326.

Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled Mean Group Estimation of Dynamic Heterogenous Panels. Journal of the American Statistical Association, 94(446), 621–634.

Sutrisno, S., Panuntun, B., & Adristi, F. I. (2020). The Effect of COVID-19 Pandemic on The Performnce of Islamic Bank in Indonesia. EQUITY, 23(2), 125–136.

Tumewang, Y. K., Isnaini, R. N., & Musta’in, J. L. (2019). The impact of macro economy toward profitability of Islamic bank. Asian Journal of Islamic Management (AJIM), 1(2), 101–108.

Wahyudi, R., Mutmainah, L., Nahar, F. H., Adha, M. A., & Rifan, A. A. (2021). Determinants of Profitability in Indonesian Islamic Banking: Case Study in the COVID-19 Period. Integrated Journal of Business and Economics, 5(1), 37–46.

Zarrouk, H., Ben Jedidia, K., & Moualhi, M. (2016). Is Islamic bank profitability driven by same forces as conventional banks? International Journal of Islamic and Middle Eastern Finance and Management, 9(1), 46–66.

Article Metrics

Abstract view(s): 1235 time(s)
PDF: 1073 time(s)


  • There are currently no refbacks.