2020
DOI: https://doi.org/10.35609/jfbr.2020.5.1(1)
Keywords: Islamic Banks, Profitability, Internal Factors, External Factors, Indonesia.
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Objective: Islamic Banks have a distinct advantage that is not only conduct a commercial operation, but to also conduct
social operations. Therefore, Islamic Banks plays an important role in developing the Indonesian economy. The aim of
this study is to investigate the impact of internal and external factors that affect the profitability of Islamic Banks in
Indonesia.
Methodology/Technique: The methodology of this research is multiple regression. The object of this research is the
Islamic banking industry in Indonesia. Internal factors include size, liquidity, asset quality, management, and efficiency
ratio. External factors include interest rate and inflation. Return on Assets is used to measure profitability. The monthly
data is collected from the financial reports of Islamic Banks between 2011 to 2016.
Findings – The findings show that size, liquidity, assets quality, management ratio, interest rate and inflation lead to a
greater Return on Assets (profitability) in Islamic Banks in Indonesia. Efficiency however does not have a significant
effect on profitability of Islamic Banks in Indonesia.
Findings: The findings show that size, liquidity, assets quality, management ratio, interest rate and inflation lead to a
greater Return on Assets (profitability) in Islamic Banks in Indonesia. Efficiency however does not have a significant
effect on profitability of Islamic Banks in Indonesia.
Novelty: Based on the results of this research, it can be concluded that the Islamic banking industry can use those
variables to improve the profitability of Islamic banks in the future. In addition, there are two variables that affect the
profitability of Islamic banking industry. For the Islamic banking industry should anticipate the movement of inflation
and interest to improve the profitability of Islamic banks.
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