Non-performing financing of Islamic rural bank industry in Indonesia

This study is aimed at analyzing the financial performance and indicator of macroeconomics to influence the quality of financing at Islamic Rural Bank Industry (IRBI) in Indonesia. The panel data regression is used to predict the change of quality of financing which is reflected by value of non-performing financing (NPF). The model of this study is grouped by four areas of working zones because IRBI has different competency depending on its region. The sample of the study used 72 IRBIs in the periods of Quarter II 2010 to Quarter I 2016. The results of the study show that simultanuously variables for the size of banks, financing to deposit ratio (FDR), operational efficiency ratio (OER), return on equity (ROE), expense to assets (EA), percentage of gross domestic product (GDP), and the rate of inflation are statistically significant to non-performing financing of the IRBI in Indonesia. GDP has strongly significant impact on the NPF of IRBI in Indonesia. According to Areas of working zones, inflation has quite significant impact on the IRBI in Zone One, and GDP has strongly significant impact on the IRBI in Zone Two, Zone Three, and Zone Four. Nevertheless, there are different effects of GDP towards NPF which has a negative impact on Zone One and Zone Four, meanwhile Zone Two and Zone Three have positive impact. In conclusion, government policy treatment should be different at every zone