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The purpose of this study is to identify factors that can encourage an increase in profit- sharing financing. These factors are third-party funds in the form of mudharabah deposits, non-performing financing, equivalent rate, operational efficiency ratio, economic growth, and inflation. The research method uses a co-integration and error correction model (ECM) with a sample of the Islamic banking industry in Indonesia from the first quarter of 2015 to the third quarter of 2020. The results show that the factors that encourage profit-sharing financing are the growth of third-party funds in the form of mudharabah deposits, non- performing low funding, low equivalent rate, operational efficiency, and economic growth. These factors are the key to driving the growth of profit-sharing financing. This research contributes to providing various alternative strategies in encouraging the growth of profit- sharing financing, such as increasing retained earnings from profit, providing attractive profit-sharing incentives, transparency of financial reports to attract people to invest in Islamic banks, prevention and supervision of non-performing financing, be careful in determining the ratio by taking into account several internal and external aspects, as well as paying attention to the movements of existing economic growth. DOI : https://doi.org/10.26905/jkdp.v25i2.5212

Credit risk is the primary risk in the banking industry related to its function in distributing credit to customers. Decreasing credit risk is the main duty of the management of banks. We examine the relationship between the Board of Directors (BOD) characteristics and credit risk in the Indonesian Islamic bank. BOD characteristics consist of BOD size, educational qualification, number of meetings, and expertise. The samples in this study are full-fledged Islamic banks in Indonesia that publish annual reports for the year 2013-2017. The data are processed using panel data regression. We indicate that the number of BOD meetings has a negative influence on credit risk, BOD size has a positive influence on credit risk while educational qualification and expertise do not influence credit risk of Islamic banks in Indonesia. Understanding BOD characteristics and credit risk are useful to mitigate the implementation of corporate governance for Islamic banks in the two-tier board system. The findings are expected to have a contribution to strengthening the BOD’s role to encourage the better performance of Islamic banks.

The rapid growth of Islamic banks also occured in Indonesia. The high growth of Islamic banks’ assets gave opportunities to increase bad debt (non-performing financing). We examined the impact of good corporate governance (GCG), number of sharia supervisory board (SSB), financing to deposit ratio (FDR), profit and loss sharing (PLS) financing ratio, profit sharing rate of financing, and temporary syirkah fund ratio on the performance of non-performance financing (NPF) and return on assets (ROA). This research also tested the influence of NPF on ROA. The population of this research was Islamic commercial banks in Indonesia with the observation ranged from 2009-2016. The samples were determined by using a purposive sampling method. Data analysis used a structural equation model with WarpPLS. We proved that empirically GCG disclosure did not affect NPF. NPF bank was influenced by PLS financing and temporary syirkah fund ratio. PLS financing income and FDR financing did not affect the NPF. Moreover, GCG, SSB, temporary syirkah fund, and NPF disclosures influenced profitability