Analysis of Incentive Compatible Constraint Establishment in Mudharabah Financing Profitability (A Case Study of Bank Pembiayaan Rakyat Syariah Al Washliyah Medan)

Agung setiawan harahap
Sugianto
Rahmat Daim Harahap

Escalate : Economics and Business Journal
Vol. 3 No. 01: Intelligent Marketing and Behavioral Insights: Redefining Institutional and Organizat

Mudharabah financing in Indonesian Islamic banking remains low (6-8%) due to moral hazard and asymmetric information risks, limiting profitability despite its profit-sharing potential. This study analyzes Incentive Compatible Constraints (ICC) implementation at BPRS Al-Washliyah Medan to mitigate risks and enhance profitability. Using qualitative field research, purposive and snowball sampling targeted employees and mudharabah stakeholders (n=unspecified, saturation-based). Data from interviews, observations, and documents were analyzed via Miles & Huberman's model (reduction-presentation-verification). Findings reveal ICC strategies—collateral requirements, age/debt service limits, transparent monitoring, revenue-sharing ratios—effectively reduce moral hazard while boosting profitability through healthier bank-customer partnerships. Implementation challenges include individual customers lacking audited reports and resource constraints. Conclusions recommend standardized ICC guidelines and quantitative model development for broader Islamic finance applications.