Cuadernos de Economía

ISSN : 0210-0266

Non-Performing Financing Among Islamic Banks in Asia-Pacific Region

  • Erna Hernawati , Universitas Pembangunan Nasional Veteran Jakarta, Indonesia
  • Abdul Razak Abdul Hadi , Universiti Kuala Lumpur Business School, Malaysia
  • Tasya Aspiranti , Universitas Islam Bandung, Indonesia
  • Raja Rehan , Universiti Kuala Lumpur Business School, Malaysia


Islamic Financial Institutions, Non-Performing Financing, Outstanding Credit, Capital Adequacy Ratio, Static Panel Data Models ,


This paper is an attempt to investigate the effects of gross domestic product (GDP), outstanding credits (OC) and capital adequacy ratio (CAR) on non-performing financing (NPF) across all Islamic banks and financial institutions in seven selected countries in the Asia-Pacific region. Within the framework of Islamic bank operations and risk assessments, we put up this estimated model into tests in this empirical study.  The investigation is carried out using yearly balanced panel data across the seven countries over the 8-year from 2013 to 2020. The static panel data estimation methods involving Fixed Effect and robust standard error are used, while non-performing financing is designated as our variable of interest.  Consistent with earlier studies, the empirical results show that OC, CAR and GDP are relevant in explaining NPF among the Islamic banks in this Asia-Pacific region.  Also, there is a negative significant relationship between GDP, CAR and NPF suggesting that an increase in GDP and CAR will reduce the percentage of NPF. Although OC is a significant variable, the strength of the relationship with NPF is seen as rather modest.