Mohammad Yusron Sholikhin, Indri Supriani, Rachmania Nurul Fitri Amijaya


This study aims to examine the correlation between Islamic banks' profitability in Indonesia and the business cycle, which measured by composite leading Indicator (CLI). This study used several annual data covering the period from 2004-2018. This study utilizes Islamic banks profitability represent by Return on Asset (ROA) data as the dependent variable, CLI data as the dependent variable, and six control variables including Gross Domestic Product, Inflation, Financial to Deposit Ratio, Capital Adequacy Ratio, Non-Performing Finance, and Operating Costs Operating Income. This study adopted multiple regression analysis by using EViews 9.0 software. This study reveals that CLI has a positive and significant impact on ROA, which indicated that the expansion of business cycle activities would increase Islamic banks' profitability. Thus, this study suggests that Islamic bank should engage with the companies that relied on their business activities in the rill sector to boost their profitability. The limitation of this study is this study adopted Indonesian Islamic banks in general. Therefore, this study does not capture the correlation amongst the variables in the specific Islamic banks and region, which might be different from this result due to the differences in banks' internal conditions, culture, and the business cycle in the various region.


Business Cycle, Composite Leading Indicator (CLI), Profitability, Islamic Bank

Full Text:



Abduh, M., & Omar, M. A. (2012). Islamic banking and economic growth: the Indonesian experience. International Journal of Islamic and Middle Eastern Finance and Management, 5(1), 35–47. https://doi.org/10.1108/17538391211216811

Al-Harbi, A. (2020). Banks’ Profitability in an Islamized Financial System: Comparative Study between Iran and Sudan. International Journal of Islamic Banking and Finance Research, 4(1), 8–14. https://doi.org/10.46281/ijibfr.v4i1.498

AL-Omar, H., & Al-Mutairi, A. (2008). Bank-Specific Determinants of Profitability: The case of Kuwait. Journal of Economic & Administrative Sciences, 24(2), 20–34.

Alarussi, A. S., & Alhaderi, S. M. (2018). Factors affecting profitability in Malaysia. Journal of Economic Studies, 45(3), 442–458. https://doi.org/10.1108/JES-05-2017-0124

Albertazzi, U., & Gambacorta, L. (2009). Bank profitability and the business cycle. Journal of Financial Stability, 5(4), 393–409. https://doi.org/10.1016/j.jfs.2008.10.002

Alexopoulos, E. C. (2010). Introduction to multivariate regression analysis. Hippokratia, 14(December 2010), 23–28.

Alharbi, A. T. (2017). Determinants of Islamic banks’ profitability: international evidence. International Journal of Islamic and Middle Eastern Finance and Management, 10(1), 331–350. https://doi.org/10.1108/IMEFM-12-2015-0161

Ali, Q., Maamor, S., Yaacob, H., & Gill, M. U. T. (2018). Impact of Macroeconomic Variables on Islamic Banks Profitability. Journal of Accounting and Applied Business Research, 1(2), 1–16.

Alzoubi, T. (2018). Determinants of bank profitability: Islamic versus conventional banks. Banks and Bank Systems, 13(3), 106–113. https://doi.org/10.21511/bbs.13(3).2018.10

Amzal, C. (2016). the Impact of Macroeconomi Variables on Indonesia Islamic Banks Profitability. Jurnal Ekonomi Dan Bisnis Islam, 2(1), 71–86.

Apergis, N. (2009). Bank profitability over different business cycles regimes: Evidence from panel threshold models. Banks and Bank Systems, 4(3), 59–70. https://doi.org/10.2139/ssrn.992654

Azad, A. S. M. S., Azmat, S., & Hayat, A. (2020). What determines the profitability of Islamic banks: Lending or fee? International Review of Economics and Finance, (May). https://doi.org/10.1016/j.iref.2019.05.015

Bank Indonesia. (2018). Monetary Policy Report Quarter I 2018. Jakarta.

Bank Indonesia. (2020). Inflation Report.

Ben Mimoun, M. (2019). Islamic banking and real performances in a dual banking system. International Journal of Islamic and Middle Eastern Finance and Management. https://doi.org/10.1108/imefm-07-2018-0223

Chowdhury, M. A. F., & Rasid, M. E. S. M. (2016). Determinants of Performance of Islamic Banks in GCC Countries: Dynamic GMM Approach. Advances in Islamic Finance, Marketing, and Management. https://doi.org/10.1108/978-1-78635-899-820161005

Djennas, M. (2016). Business cycle volatility, growth and financial openness: Does Islamic finance make any difference? Borsa Istanbul Review, 16(3), 121–145. https://doi.org/10.1016/j.bir.2016.06.003

Farook, S., Hassan, M. K., & Clinch, G. (2012). Profit distribution management by Islamic banks: An empirical investigation. Quarterly Review of Economics and Finance, 52(3), 333–347. https://doi.org/10.1016/j.qref.2012.04.007

Fianto, B. A., Gan, C., Hu, B., & Roudaki, J. (2018). Equity financing and debt-based financing: Evidence from Islamic microfinance institutions in Indonesia. Pacific-Basin Finance Journal, 52(August 2016), 163–172. https://doi.org/10.1016/j.pacfin.2017.09.010

Fianto, B. A., Maulida, H., & Laila, N. (2019). Determining factors of non-performing financing in Islamic microfinance institutions. Heliyon, 5(8). https://doi.org/10.1016/j.heliyon.2019.e02301

Hesamian, G., & Akbari, M. G. (2020). A robust varying coefficient approach to fuzzy multiple regression model. Journal of Computational and Applied Mathematics, 371, 1–13. https://doi.org/10.1016/j.cam.2019.112704

Imam, P., & Kpodar, K. (2016). Islamic banking: Good for growth? Economic Modelling, 59, 387–401. https://doi.org/10.1016/j.econmod.2016.08.004

ISDB Data. (2018). IDB Member Country Macro-Economic Statistics.

Juhro, S. M., Narayan, P. K., Iyke, B. N., & Trisnanto, B. (2020). Is there a role for Islamic finance and R&D in endogenous growth models in the case of Indonesia? Pacific Basin Finance Journal, 101297. https://doi.org/10.1016/j.pacfin.2020.101297

Kassim, S. (2016). Islamic finance and economic growth: The Malaysian experience. Global Finance Journal, 30, 66–76. https://doi.org/10.1016/j.gfj.2015.11.007

Kayed, R. N. (2012). The entrepreneurial role of profit-and-loss sharing modes of finance: theory and practice. International Journal of Islamic and Middle Eastern Finance and Management, 5(3), 203–228. https://doi.org/10.1108/17538391211255205

Khasawneh, A. Y. (2016). Vulnerability and profitability of MENA banking system: Islamic versus commercial banks. International Journal of Islamic and Middle Eastern Finance and Management, 9(4), 454–473. https://doi.org/10.1108/IMEFM-09-2015-0106

Maamor, S., Yaacob, H., & Gill, M. U. T. (2018). Impact of Macroeconomic Variables on Islamic Banks Profitability Impact of Macroeconomic Variables on Islamic Banks Profitability Biographical notes : Journal of Accounting and Applied Business Research, 1(April).

Masood, O., & Ashraf, M. (2012). Bank-specific and macroeconomic profitability determinants of Islamic banks: The case of different countries. Qualitative Research in Financial Markets, 4(2–3), 255–268. https://doi.org/10.1108/17554171211252565

Masood, O., Ashraf, M., & Turen, S. (2015). Bank-Specific and Macroeconomic Determinants of Bank Profitability : Evidence from Member States of the OIC. Journal of Islamic Financial Studies, 1(1), 43–51.

Meslier, C., Risfandy, T., & Tarazi, A. (2019). Islamic banks’ equity financing, Shariah supervisory board, and banking environments. Pacific-Basin Finance Journal. https://doi.org/10.1016/j.carbpol.2020.115849

Nasution, Z. (2020). Profit efficiency development of Islamic Banking using the stochastic frontier approach. Jurnal Ekonomi & Keuangan Islam, 6(1), 55–63. https://doi.org/10.20885/jeki.vol6.iss1.art6

Nordstrom, G. D. (2007). Leading indicators. Industrial Fabric Products Review, 92(11), 8. https://doi.org/10.1016/b978-0-12-295180-0.50026-4

OECD Data. (2016). Composite leading indicator (CLI).

OECD Data. (2020). Selected indicators for Indonesia.

Otoritas Jasa Keuangan. (2020). Sharia Banking Statistic.

Paltrinieri, A., Dreassi, A., Rossi, S., & Khan, A. (2020). Risk-adjusted pro fi tability and stability of Islamic and conventional banks : Does revenue diversi fi cation matter ?, (July 2018). https://doi.org/10.1016/j.gfj.2020.100517

Rahmah, A. Z., & Armina, S. H. (2020). Macro and micro determinants of the non-performing finance: The case of Indonesian Islamic bank. Jurnal Ekonomi & Keuangan Islam, 6(1), 34–41. https://doi.org/10.20885/jeki.vol6.iss1.art4

Ramlan, H., & Adnan, M. S. (2016). The Profitability of Islamic and Conventional Bank: Case Study in Malaysia. Procedia Economics and Finance, 35(October 2015), 359–367. https://doi.org/10.1016/s2212-5671(16)00044-7

Rizvi, S. A. R., Narayan, P. K., Sakti, A., & Syarifuddin, F. (2019). Role of Islamic banks in Indonesian banking industry: an empirical exploration. Pacific Basin Finance Journal, (February), 101117. https://doi.org/10.1016/j.pacfin.2019.02.002

Sahyouni, A., & Wang, M. (2019). Liquidity creation and bank performance: evidence from MENA. ISRA International Journal of Islamic Finance, 11(1), 27–45. https://doi.org/10.1108/IJIF-01-2018-0009

Sayid, O., Musse, H., & Echchabi, A. (2014). Factors Determining Islamic Banks ’ Deposits in Qatar : An Empirical Study, 4(6), 987–994.

Setya, V. A., Supriani, I., & Fianto, B. A. (2020). Determinants of Underpricing in Islamic and Non-Islamic Shares on IPO. Shirkah Journal of Economics and Business, 5(1). https://doi.org/10.22515/shirkah.v5i1.276

Shah Khan, M. M., Ejaz, F., & Aslam, E. (2014). Determinants of Profitability of Islamic Banking Industry: An Evidence from Pakistan. Business & Economic Review, 6(2), 27–46. https://doi.org/10.22547/ber/6.2.2

Shahid, M. S., Hassan, M., & Rizwan, M. (2015). Determinants of Islamic Banks’ Profitability: Some Evidence from Pakistan. Pakistan Journal of Islamic Research, 16, 149–168.

Slimi, S. (2012). Bank profitability and the business cycle: Evidence from MENA countries. Economic Research Forum. https://doi.org/10.1016/j.jfs.2008.10.002

Sriyana, J. (2015). Islamic banks’ profitability amid the competitive financing in Indonesia. International Journal of Applied Business and Economic Research, 13(4), 1695–1710.

Stock, J. H., & Watson, M. W. (1993). Business Cycles, Indicators, and Forecasting. Chicago: The University of Chicago Press.

Sudarsono, H. (2017). Analisis Pengaruh Kinerja Keuangan terhadap Profitabilitas Bank Syariah di Indonesia Pendahuluan Return on Aset ( ROA ) atau profitabilitas merupakan rasio yang digunakan, 8, 175–203.

Sukmana, R., & Febriyati, N. A. (2016). Islamic banks vs conventional banks in Indonesia: An analysis on financial performances. Jurnal Pengurusan, 47, 81–90. https://doi.org/10.17576/pengurusan-2016-47-07

Supriani, I., & Sudarsono, H. (2018). Analisis Pengaruh Variabel Mikro dan Makro terhadap NPF Perbankan Syariah di Indonesia. Equilibrium: Jurnal Ekonomi Syariah, 6(1), 1. https://doi.org/10.21043/equilibrium.v6i1.3040

Toumi, K. (2019). Islamic ethics, capital structure and profitability of banks; what makes Islamic banks different? International Journal of Islamic and Middle Eastern Finance and Management, 13(1), 116–134. https://doi.org/10.1108/IMEFM-05-2016-0061

Trabelsi, M. A., & Trad, N. (2017). Profitability and risk in interest-free banking industries: a dynamic panel data analysis. International Journal of Islamic and Middle Eastern Finance and Management, 10(4), 454–469. https://doi.org/10.1108/IMEFM-05-2016-0070

Trad, N., Trabelsi, M. A., & Goux, J. F. (2017). Risk and profitability of Islamic banks: A religious deception or an alternative solution? European Research on Management and Business Economics, 23(1), 40–45. https://doi.org/10.1016/j.iedeen.2016.09.001

Uyanık, G. K., & Güler, N. (2013). A Study on Multiple Linear Regression Analysis. Procedia - Social and Behavioral Sciences, 106, 234–240. https://doi.org/10.1016/j.sbspro.2013.12.027

Vervuurt, J. (2016). Business Cycle Based Portfolio Optimisation. Tilburg University.

Yanikkaya, H., Gümüş, N., & Pabuçcu, Y. U. (2018). How profitability differs between conventional and Islamic banks: A dynamic panel data approach. Pacific Basin Finance Journal, 48(July 2017), 99–111. https://doi.org/10.1016/j.pacfin.2018.01.006

Zarrouk, H., Jedidia, K. Ben, & Moualhi, M. (2016). Is Islamic bank profitability driven by same forces as conventional banks ? International Journal of Islamic and Middle Eastern Finance and Management, 9(1), 46–66. https://doi.org/10.1108/IMEFM-12-2014-0120

DOI: http://dx.doi.org/10.30659/ijibe.6.1.37-53


  • There are currently no refbacks.

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Creative Commons License

P-ISSN : 2502-0633

E-ISSN : 2502-4647

IJIBE is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

View My Stats

Contact Us

IJIBE (International Journal of Islamic Business Ethics) Gedung Ibnu Khaldun, Jalan Raya Kaligawe KM. 4, PO BOX 1054, Semarang 50112, Central Java, Indonesia. E-mail: ijibe.fe@unissula.ac.id.