Shirka (Syirkah) Financing in Indonesia's Islamic Banking

In the Indonesia’s Islamic banking system that has the natural operations in the revenue-sharing basis, syirkah financing that based on revenue-sharing basis is important as the operations of Islamic banks to maximize profits. This study aimed to determine the effect of syirkah financing on profitability of Islamic banking in Indonesia. Influence of shirka financing performance can be estimated by a Stokastic Frontier Approach (SFA) in the form of a linear regression model analysis (Pooled Ordinary Least Squares), Fixed Effects regression model and Random Effects regression model. 

The results showed that the level of shirka financing statistically significant has negative effect on the three indicators of profitability of Islamic banking in Indonesia, namely Return on Assets (ROA), Return on Equity (ROE) and profit ratio towards total financing (Return to Financing Ratio). The predicted possibilities are the low rate of return in Syirkah financing that increase Rate of return Risk and the investment risk that has not been handled optimally.