COVID-19 and the Potency of Disruption on the Islamic Banking Performance (Indonesia Cases)

The indicators commonly used in conducting simulations are economic growth and the US Dollar exchange rate. The purpose of this study is to conduct a stress test on the impact of macroeconomic changes on key financial indicators of the three largest Islamic banks in Indonesia, which are subsidiaries of state-owned banks. The banks are Bank Mandiri Syariah (BSM), BNI Syariah (BNIS), and BRI Syariah (BRIS). The stress test method in this study uses three scenarios, namely: mild, moderate, and worst. Furthermore, the key financial indicators used in this research are assets, net profit, return on assets (ROA), and non-performing financing (NPF). The stress test results state that the mild scenario and moderate scenario of the Islamic banking industry can still endure. However, inthe worst-case scenario, NPF of the Islamic banking industry has a significant increase. Also, during the current COVID-19 pandemic, banks must mitigate risk early by strengthening liquidation, restructuring, and changing strategic initiatives. Also, there is an alternative to merge of Islamic Bank that subsidiaries from its state bank. Furthermore, the government and all stakeholders must collaborate to overcome the negative effects of the COVID-19 pandemic outbreak to avoid major losses to both the lives of the people and the nation's economy.