The The Effect of DPK, NPF, and FDR on the Profitability of Islamic Banking in Indonesia 103 35

Abstrak

The primary objective of this study is to investigate the impact of Third-Party Funds (DPK), Non-Performing Financing (NPF), Financing to Deposit Ratio (FDR), Capital Adequacy Ratio (CAR), and Mudharabah Financing on the profitability of Islamic Banking in Indonesia over the 2020-2024. The research used secondary data obtained from published monthly financial yearly reports of Islamic banking institutions. A quantitative approach was applied, and multiple regression analysis utilized to examine the relationships between variables. To attain a holistic perspective of fiscal results, profitability was assessed by resulting both Return on Assets (ROA) and Return on Equity (ROE) as primary metrics. The finding indicates that DPK and FDR substantial positive influence on both ROA and ROE. While CAR demonstrates a statistically significant upward impact on ROE, its correlation with ROA was found to be negligible. Mudharabah Financing significantly affects ROA but does not influence ROE. Meanwhile, Non-Performing Financing (NPF) exhibits no discernible statistical impact on either measure of profitability, suggesting its influence is marginal in this context. Musyarakah Financing was excluded from the model due to multicollinearity issues identified during testing. Simultaneously, all independent variables significantly influence profitability. These results suggest that affective financial ratio management plays an important role in enhancing the profitability within the Islamic banking sector.