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The Economics and Finance Letters

June 2019, Volume 6, 2, pp 149-158

Analysis of Effect of Profitability, Capital, Risk Financing, the Sharia Supervisory Board and Capabilities Zakat in Islamic Perspective with Circular Approach Causastion on Islamic Banks in Indonesia

Raja Ria Yusnita

Yuzwar Z. Basri

Tatik Mariyanti

Zulhelmy .

Willy Arafah

Raja Ria Yusnita¹ ^,

Yuzwar Z. Basri¹ Tatik Mariyanti¹ Zulhelmy .¹ Willy Arafah¹

Trisakti University, Jakarta, Indonesia ¹

on Google Scholar

on PubMed

Pages: 149-158

DOI: 10.18488/journal.29.2019.62.149.158

Article History:

Received: 08 May, 2019
Revised: 13 June, 2019
Accepted: 23 July, 2019
Published: 06 September, 2019

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Abstract:

This study aimed to analyze the effect of profitability, capital, financing risks, the ability of Sharia supervisory boards and zakat from an Islamic perspective in the circular causation approach, on Sharia banks in Indonesia. This study used a methodology to integrate the TSR of interaction, integration, and evolustion (IIE) to produce factors that affect the ability of zakat and the factors that affect the profitability of Indonesian Islamic banks. The study used the purposive sampling method with a sample of five Islamic banks from 2014 until 2017. This study uses Two Stage Least Square (2SLS) analysis to solve the problem with the Eviews program. The results demonstrated that the ability of zakat can be influenced by profitability, risk financing and capital while the Sharia supervisory board does not have a significant effect on the zakat capability. Profitability may be affected by the ability of zakat, risk financing and capital but not the Sharia supervisory board. The implications show that there is a simultaneous relationship between the ability of zakat and profitability. We recommend that Islamic banks that adhere to Islamic principles should not be afraid to issue zakat as the tithe does not diminish but increases wealth.

Contribution/ Originality
This study used Two Stage Least Square (2SLS) analysis to solve the problem with the Eviews program. This study created a new formula for the interaction, integration and evolution (IIE) process resulting from the Tawhidi String Relation (TSR) calculation. This study found no reciprocal relationship between zakat capability and profitability. This paper contributes to the first logical analysis that the traffic zakat Islamic banks can be influenced by profitability, the risks of financing and the Sharia supervisory board. Profitability may be affected by the ability of zakat, risk financing, and Sharia supervisory board. Capital has no effect on the ability of zakat and profitability. The results show that Islamic banks should adhere to Islamic principles and not be afraid to issue zakat as the tithe does not diminish but increases wealth.

Keywords:

Charity, Profitability, Capital, Risk financing, Sharia supervisory board.

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