Determinants of Liquidity in Islamic Banking: A VECM Analysis of Bank Muamalat (2008–2024)

Research Aims: This research aims to examine the impact of Third-Party Funds (DPK), Capital Adequacy Ratio (CAR), Non-Performing Financing (NPF), and inflation on the liquidity of Bank Muamalat over the period 2008–2024. Design/methodology/approach: This research adopts a quantitative approach. The sample comprises quarterly financial reports of Bank Muamalat and inflation data from Bank Indonesia the period from 2008 to 2024, totaling 68 observations. The hypotheses were tested using the Vector Error Correction Model (VECM) with the aid of the EViews 12 software. Research Findings: The analysis shows that Third-Party Funds (DPK) consistently exert a positive and significant influence on the liquidity of Bank Muamalat in both the short and long term. This indicates that stable deposit growth is essential for maintaining and enhancing the bank’s liquidity position. Additionally, a strong Capital Adequacy Ratio (CAR) significantly contributes to liquidity by improving the bank’s risk management capacity and supporting sustainable growth and operational stability. Conversely, Non-Performing Financing (NPF) does not affect liquidity significantly in the short term, likely due to effective internal risk mitigation policies. However, in the long term, NPF has a positive impact on liquidity, suggesting that the bank’s strategic management of credit risk helps preserve liquidity despite rising non-performing assets.