Open AccessThe Application of Variance-based Structural Equation Modeling for Predicting the Intermediation Margin of Islamic Banking Industry
Author(s) -
Nurul Kamila,
Dwi Suhartanto
Publication year - 2019
Publication title -
iop conference series. materials science and engineering
Language(s) - English
Resource type - Journals
eISSN - 1757-899X
pISSN - 1757-8981
DOI - 10.1088/1757-899x/662/2/022104
Subject(s) - intermediation , islam , margin (machine learning) , financial intermediary , net interest margin , market liquidity , business , inflation (cosmology) , islamic banking , financial system , monetary economics , economics , quarter (canadian coin) , finance , return on assets , computer science , profitability index , philosophy , physics , archaeology , machine learning , theoretical physics , history , theology
The purpose of this paper is to predict the determinants of bank margins (bankspecific as well as macroeconomic condition) in Islamic banks by applying SEM-PLS. Data were collected through financial statements of 11 Islamic banks in Indonesia obtained in each website of bank, covering bank quarter observations for the period of 2013 to the second quarter of 2018. The results of this study indicate the specific factors of banks that have the greatest influence on NIM are liquidity variables. In contrast, macroeconomic factors (GDP and inflation) do not have a significant effect on Islamic bank NIMs, but specific bank and macroeconomic factors together affect Islamic bank NIMs. while the macroeconomic condition is not significant. In this study using the method of investigating the determinants of the margin of financial intermediation for Islamic banks operating in Indonesia by applying SEM-PLS. This finding improves our understanding on the usage of SEM-PLS to predict the margin intermediation of Islamic banks. This study provides a guidance and strategy for Islamic bank managers to manage their intermediation margin which can affect their customers interest to use Islamic banking services.