![](bg2.png)
the banking system, shows that liquidity risk has a
significant relationship with profitability in the
banking system, compared with other internal factors.
A study done by (Petria, Capraru, and Ihnatov 2015)
shows that liquidity risk (LDR) affects bank
profitability (ROA and ROE), and the research done
by (Bassey and Moses 2015) indicates that there is a
statistically significant relationship between loan to
deposit ratio (LDR) and return on equity (ROE).
Meanwhile the research done by (Tafri et al.
2009) shows that liquid assets / total liabilities are
found to have an insignificant impact on the size of
profitability (ROA and ROE). A study done by (Rasul
2013) shows that there is no significant relationship
between liquidity and ROE. Research done by
(Olarewaju and Adeyemi 2015) shows that there is no
causal relationship between liquidity (total loan and
advances / total deposit) and probability (ROE). A
study done by (Mwizarubi, Singh, and Prusty 2015)
shows that there is no statistically significant
relationship between bank profitability (NIM, ROA,
ROE) and liquidity (LDR and LADR). The research
done by (Molefe and Muzindutsi 2014) shows that
liquidity has no effect on bank profitability (ROA and
ROE). And the research done by (Dabiri, Yusof, and
Wahab 2017) shows that liquidity negatively and
significantly affects profitability of the Islamic banks
in the United Kingdom.
Liquidity risk in this study is measured by
Financing to Deposit Ratio (FDR). FDR in the world
of Islamic banking refers to financing without
interest. FDR indicates the ability of banks to repay
the withdrawal of funds by depositors by controlling
the credit given as a source of liquidity. Greater credit
leads to greater earned income, and because the
income rises profit will also increase.
Credit risk received by a bank is one of the bank's
business risks, resulting from uncertainty in return or
resulting from non-repayment of loans granted by the
bank to the debtor (Armereo 2015). Based on
previous studies, there are differences in results from
each research. The research of (Tafri et al. 2009)
shows that loan loss provision (loan) has a significant
impact on ROA and ROE for conventional and sharia
banks. Research conducted by (Hymore et al. 2012)
shows that credit risk (Net Charge Off and NPL) has
a positive and significant relationship with bank
profitability (ROE). Research done by (Abiola and
Olausi 2014) shows that credit risk (NPL and CAR)
has a significant impact on the profitability (ROA and
ROE) of commercial banks in Nigeria. Research done
by (Khan, Ijaz, and Aslam 2014) shows that the
profitability of sharia banking (ROA, ROE, EPS) is
significantly influenced by credit ratio (NPL).
Research done by (Gholami and Salimi 2014) aims to
study and investigate the relationship between credit
risk, liquidity risk and profitability in the banking
system. Based on the results obtained, credit risk has
a significant relationship with profitability in the
banking system, compared with other internal factors.
Research done by (Petria et al. 2015) shows that
credit risk affects bank profitability (ROA and ROE).
And the research done by (Getahun, Anwen, and Bari
2015) indicates that there is a strong relationship
between credit risk (NPLR, LPTLR, LPNDLR,
LPTAR, and NPLTLR) and commercial bank
performance (ROA and ROE) in Ethiopia. On the
other hand, a study by (Noman et al. 2015) shows that
there is a significant negative influence of NPLGL,
LLRGL on all profitability indicators (NIM, ROA,
ROE). Furthermore, research done by (Kithinji 2010)
shows that profitability is not affected by credit risk
in Commercial Banks in Kenya.
Credit risk in this study was measured by Non
Performing Financing (NPF). Non Performing
Financing (NPF) called Non Performing Loan (NPL)
in conventional banking is a financial ratio associated
with credit risk. NPF shows the bank's capability in
managing problematic financing provided by the
bank. The higher this ratio, the worse the credit
quality of the bank. Worsening credit quality leads to
an increase in bad loans, which will lead to the bank
having a higher risk of landing in troubled conditions.
Loans in this case are credits granted to third parties
excluding credit to other banks.
The results from previous studies indicate that
there are differences in research results (research gap)
on the effect of liquidity risk and credit risk on
profitability. Based on this phenomenon, this study
aims to re-examine the effect of liquidity risk and
credit risk on profitability in General Sharia Banks in
Indonesia.
2 METHODS
The type of research used in sthis study is quantitative
research. The research method used in this study is an
explanatory survey. The sampling technique used in
this study is total sampling. The data source used is
secondary data from the Sharia banking statistics
issued by the Financial Services Authority of
Indonesia. We used time series data gathered from 12
General Sharia Banks in Indonesia in the first quarter
up to the fourth quarter of 2014 until 2016.
The independent variables in this research are
liquidity risk and credit risk. Liquidity risk in this
study is measured by Financing to Deposit Ratio
(FDR) and credit risk in this study is measured by
Non Performing Financing (NPF). The dependent
variable in this study is profitability measured by the
ratio of Return of Equity (ROE), following the
research done by Petria, Capraru, and Ihnatov (2015).
ICEEE 2017 - 2nd International Conference on Economic Education and Entrepreneurship
800