FINANCING PRODUCT DIVERSIFICATION STRATEGY AND ITS IMPLICATIONS FOR PROFIT-AND-LOSS SHARING FINANCING CREDIT RISK (MUDHARABAH AND MUSYARAKAH CONTRACTS)

Ahmad Syukri (University of Northern Sumatra)
Meilita Tryana Sembiring (University of Northern Sumatra)
Fahmi Natigor (University of Northern Sumatra)

Journal of Accounting Research, Utility Finance and Digital Assets (JARUDA)
Vol. 5 No. 1 (2026): July

This study investigates the effectiveness of product diversification in managing credit risk in profit-and-loss sharing (PLS) financing at Bank Sumut Syariah. While Islamic banking theoretically leverages diversification for risk mitigation, akin to Modern Portfolio Theory, this research reveals an "Organizational Readiness Paradox": quantitative diversification has failed to effectively curb persistently high PLS risk. Using a qualitative descriptive-exploratory single case study approach, data were collected through in-depth interviews with 59 informants, field observations, and portfolio data analysis (2013–2024). Findings show that PLS non-performing financing consistently accounts for over 50% of total NPF and significantly exceeds consolidated NPF. This stems from a strategic gap between policy and portfolio reality, internal capability weaknesses (Human Resources 45.8%, Systems 28.8%), and misaligned incentive systems that prioritize volume over quality. The paradox underscores that elevated PLS risk is not inherent to Sharia contracts but rather reflects a mismatch between organizational capability and risk-sharing complexity. The study emphasizes the critical role of governance, robust Management Information System Early Warning System infrastructure, and adaptive human capital for effective diversification strategies.