Management ownership and the performance of Islamic microfinance institutions: a panel data analysis of Indonesian Islamic rural banks
International Journal of Islamic and Middle Eastern Finance and Management
ISSN: 1753-8394
Article publication date: 17 May 2021
Issue publication date: 4 November 2021
Abstract
Purpose
This study aims to analyse the relationship between management ownership and the performance of Islamic microfinance institutions (MFIs) using panel data from Indonesian Islamic rural banks (Bank Pembiayaan Rakyat Syariah [BPRS]).
Design/methodology/approach
This study uses unbalanced quarterly panel data from BPRS during the period from 2011 to 2016. Performance, as the dependent variable in this study, is analysed based on three sets of measures, namely, profitability, efficiency and the financing risk. Management ownership, as the independent variable in this study, is represented by ownership by the board of directors (BOD), the board of commissioners (BOC) and the sharia supervisory boards (SSB).
Findings
The results show that ownership by the BOD and BOC does not have a significant relationship with profitability and efficiency. However, the BOD ownership has a negative relationship with the financing risk and vice versa for the BOC ownership. Additionally, the study reveals that ownership by the SSB plays a positive and significant role in increasing the profitability and efficiency but does not have a significant impact on the financing risk.
Originality/value
This is one of the first studies to provide empirical results regarding the relationship between management (BOD, BOC and SSB) ownership and the performance of BPRS. The finding reveals that ownership by the SSB is very important to increase the profitability and efficiency of the BPRS.
Contribution to Impact
This study fills the gap in the literature about Islamic MFIs in Indonesia, especially the BPRS. This research also provides an insight into corporate governance practices and Islamic MFIs’ performance using BPRS data. The findings provide useful information for policy makers and regulators.
Keywords
Acknowledgements
This research is funded by Ministry of Research, Technology, and Higher Education of Republic of Indonesia managed by Universitas Gadjah Mada under Penelitian Berbasis Kompetensi Scheme, contract number 1694/UN1/DITLIT/DIT-LIT/LT/2018.
Citation
Fithria, A., Sholihin, M., Arief, U. and Anindita, A. (2021), "Management ownership and the performance of Islamic microfinance institutions: a panel data analysis of Indonesian Islamic rural banks", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 14 No. 5, pp. 950-966. https://doi.org/10.1108/IMEFM-05-2020-0257
Publisher
:Emerald Publishing Limited
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