THE EFFECT OF INCOME SOURCES, FINANCING SOURCES, AND OPERATIONAL EFFICIENCY ON THE PERFORMANCE OF ISLAMIC BANKS IN INDONESIA AND MALAYSIA

Financial performance is one of the important indicators used to assess the success of Islamic
banks in managing their financial activities and maintaining business sustainability. The
performance of Islamic banks may be influenced by several factors, including income
sources, financing sources, and operational efficiency. This study aims to obtain empirical
evidence regarding the effect of income sources, financing sources, and operational
efficiency on the performance of Islamic banks in Indonesia and Malaysia. This study
employs a quantitative approach using secondary data obtained from Islamic commercial
banks operating in Indonesia and Malaysia during the 2020–2024 period, resulting in panel
data observations. Financial performance is measured using profitability indicators, namely
Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM).
The independent variables in this study consist of income sources, including profit-sharing
income, margin income, fee-based income, and investment income; financing sources,
including profit-sharing financing, trade-based financing, lease-based financing, and other
non-profit-sharing financing; as well as operational efficiency measured using the Operating
Expenses to Operating Income ratio (BOPO). The theories underlying this study emphasize
that income diversification, financing management, and operational efficiency are important
factors in improving profitability and maintaining the stability of Islamic banks.
The results show that profit-sharing income has a positive and significant effect on Net
Interest Margin (NIM), while margin income, fee-based income, and investment income do
not significantly affect Islamic bank performance. In terms of financing sources, profit
sharing financing has a positive and significant effect on ROA, ROE, and NIM, while lease
based financing has a positive and significant effect on ROA and NIM. In contrast, other non
profit-sharing financing has a negative and significant effect on NIM. Furthermore,
operational efficiency (BOPO) has a negative and significant effect on ROA, ROE, and NIM.