Revolutionizing Islamic Banking Metrics: Integrating Financial and Sharia-Based Indicators in Performance Evaluation

The purpose of this study is to evaluate the performance of Islamic banks in Indonesia from 2016 to 2022 using an integrated approach combining the Risk Profile, Good Corporate Governance, Earnings, and Capital (RGEC) and the Islamicity Performance Index (IPI). The study addresses gaps in existing literature by incorporating sharia-based dimensions such as the Profit Sharing Ratio (PSR) and Zakat Performance Ratio (ZPR), alongside traditional financial indicators like Return on Assets (ROA) and Return on Equity (ROE). Data were collected from audited financial reports of four Islamic banks and analyzed using regression and ANOVA to identify trends and causal relationships. The results highlight that effective risk management, demonstrated by a low Non-Performing Financing (NPF) ratio and stable Financing to Deposit Ratio (FDR), positively correlates with improved ROA and ROE. PSR emerged as a significant indicator of customer trust in sharia-compliant products, while ZPR indicated challenges in enhancing social contributions through zakat. This study provides a comprehensive evaluation framework for Islamic banks, offering theoretical insights into the integration of RGEC and IPI and practical guidance for improving risk management, efficiency, and sharia compliance. These findings have implications for policymakers and stakeholders in developing sustainable Islamic banking practices. Future research is recommended to explore causal relationships between sharia-based indicators and customer loyalty while expanding this model to global contexts.