Mohamad Yazid Isa
Universiti Utara Malaysia

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Third-Party Funds, Financing Risk, and Islamic Bank Profitability: Does GDP Growth Matter? Annisa Fitri; Khodijah Ishak; Zulhendri; Mohamad Yazid Isa
Jurnal Magister Ekonomi Syariah Vol. 5 No. 1 Juni (2026): J-MES: Jurnal Magister Ekonomi Syariah
Publisher : Program Studi Magister Ekonomi Syariah, Fakultas Ekonomi dan Bisnis Islam, Universitas Islam Negeri Sunan Kalijaga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.14421/j-mes.2026.051-03

Abstract

The profitability of Islamic commercial banks depends on their ability to transform customer funding into productive financing while controlling asset-quality risk across changing economic conditions. However, empirical evidence on the profitability effects of third-party funds (TPF) and non-performing financing (NPF) remains mixed, and the role of GDP growth as a moderator has received limited attention in Indonesian Islamic banking. This study examines whether TPF and NPF are associated with the profitability of Indonesian Islamic commercial banks and whether annual GDP growth changes those relationships. Using a balanced dataset of 12 banks during 2018–2024 (84 bank-year observations), bank-level data were obtained from annual financial reports and the Indonesian Financial Services Authority (OJK), while GDP growth data were obtained from the World Bank. Partial Least Squares Structural Equation Modeling (PLS-SEM) in SmartPLS was estimated separately for 2018–2020 and 2021–2024. Profitability is measured by return on assets (ROA). TPF is not significantly associated with ROA in either phase. NPF is negatively and significantly associated with ROA in 2018–2020 (p = 0.015) but not in 2021–2024 (p = 0.668). GDP does not significantly moderate either relationship. The findings imply that funding growth alone does not guarantee profitability and that financing quality becomes more visible as an earnings constraint during severe stress. The study contributes by testing the same funding–risk–profitability structure across two economic phases while treating GDP growth as a moderator.