Finding financing risk factors in Indonesian Islamic banks: A geographically weighted regression approach

Khasanah, Umrotul ORCID: https://orcid.org/0000-0001-5412-5800 and Wicaksono, Ahmad Tibrizi Soni ORCID: https://orcid.org/0000-0001-8643-1351 (2025) Finding financing risk factors in Indonesian Islamic banks: A geographically weighted regression approach. Iranian Economic Review, 29 (1). pp. 118-159. ISSN 1026-6542

Text 23840.pdf - Published Version Available under License Creative Commons Attribution. Download (614kB)

Abstract

This study aimed to measure Non-Performing Financing (NPF) factors through Gross Regional Domestic Product (GRDP), unemployment rate, office network, consumptive financing, and COVID-19 cases. Cross-section data in 34 Indonesian provinces were analyzed using Geographically Weighted Regression (GWR) through global regression confirmation. The results showed differences between the GWR and global regression. All exogenous variables have spatial variability to endogenous variables. This resulted in variations in local models influencing NPF, including in DKI Jakarta, West Java, Central Java, DI Yogyakarta, East Java, Bali, and West Nusa Tenggara Provinces. Additionally, this study has implications for bankers in mitigating credit risk by maintaining the adequacy ratio of funds and tightening the verification of prospective debtors. Bankers should also restructure financing, monitor portfolio performance, and build digital infrastructure in each regional office by considering the dynamics in the provinces. In addition, the province's representative of the Financial Services Authority and Central Bank offices must coordinate directly supervising Islamic banks in the region.

Item Type:	Journal Article
Keywords:	Financial Intermediaries; Geographically Weighted Regression; Islamic Bank; Regional Growth; Risk Assessment
Subjects:	15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1502 Banking, Finance and Investment > 150299 Banking, Finance and Investment not elsewhere classified
Divisions:	Faculty of Economics > Department of Islamic Banking
Depositing User:	Umrotul Khasanah
Date Deposited:	12 Jun 2025 14:29

Downloads

Origin of downloads

Actions (login required)

View Item