The Determinants of Maqasid Shariah Based Performance of Islamic Banks in Indonesia

Abstract

This study aims to examine the determinants of <em>maqasid shariah</em> based performance of Islamic banks in Indonesia. The data was extracted from the published annual audited reports of Islamic banks in Indonesia during the period 2014-2017. This research used correlation and multiple linear regression analysis to examine the proposed hypotheses. <em>Maqasid shariah</em> based performance was proxied by <em>maqasid index</em>. The proposed factors as determinants of <em>maqasid shariah</em> based performance are profit loss sharing financing, cost efficiency, and risk taking behavior. The results of this research revealed that profit sharing financing positively influences <em>maqasid shariah</em> based performance, but risk taking behavior has a negative impact. Cost efficiency does not influence <em>maqasid shariah</em> based performance. The implication of this finding is that Islamic banks should have commitment to realize <em>maqasid shariah</em> through increasing their profit loss sharing financing in the <em>mudharabah</em> and <em>musharakah</em> modes