Do Internal Bank Ratios Affect Financing Levels?: Insights from Islamic Commercial Banks

This study seeks to analyse the impact of internal bank conditions on the financing operations of Islamic Commercial Banks in Indonesia. A quantitative explanatory research methodology was utilised, employing secondary data derived from the annual financial statements of each bank. The observation period from 2019 to 2024 was chosen as it includes the phases preceding, during, and following the Covid-19 pandemic, marked by economic recovery, industry consolidation, and regulatory enhancement, necessitating a reassessment of the impact of internal banking factors on financing. The study population comprised 14 Islamic Commercial Banks operating in Indonesia in 2024, as per data from the Financial Services Authority (Otoritas Jasa Keuangan), with a sample of ten banks chosen through purposive sampling. Panel data regression analysis was utilised to investigate the impact of the Operational Efficiency Ratio (BOPO), Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), and Non-Performing Financing (NPF) on total financing. The results indicate that BOPO, FDR, and NPF do not significantly influence total financing, while CAR exerts a significant negative impact on total financing. This study enhances the literature by illustrating that the impact of internal banking factors on financing is inconsistent, with only the Capital Adequacy Ratio (CAR) showing a significant correlation with total financing.