The Influence of the Implementation of Sharia Principles in Banking: by M. Suyanto

The objective of my research was to analyze the influence of the implementation of sharia principles on the bank performance and the welfare of employees and society involved in the activities of Sharia Banks in Indonesia by selecting the bank performance as an intervening variable. The population of this research was sharia banks in Indonesia between 2002 and 2006. The structural equation modeling (SEM) was used to analyze a series of dependence relationships among variables simultaneously.
The study of several concepts and indicators in sharia banking revealed the following models. First, the implementation of sharia principle variable was influenced by several indicators, i.e., sharia financing, sharia funding, and aqad compliance. Second, the bank performance variable was influenced by a number of indicators, i.e., profitability, solvency, and commitment to community. Third, the society welfare variable was affected by indicators of financing, qordul hasan and zakat-infaq-sodaqoh. Fourth, the employee welfare variable was influenced by the indicators of salary-bonus, general benefits and relegious benefits.
The results showed that first, the implementation of sharia principles had a positive and significant influences on the Sharia Bank performance of at α = 0.05 with a path coefficient of 0.95 and p value of 0.000, suggesting that the implementation of sharia principles in Sharia Banks in Indonesia which is getting better, more consistent and more sustainable would, in turn, improve the bank performance or result in the higher profitablility and solvability and give the benefit to the small business entrepreneurs joining the Sharia Banks as customers. Second, the implementation of sharia principles had an insignificant influences on the welfare of society involved in the activities of Sharia Banks in Indonesia at α = 0.05 with a path coefficient of -0.23 and p value of 0.671, indicating that the implementation of sharia principles in Sharia Banks in Indonesia which is getting better, more consistent and more sustainable would not increase the welfare of society involved in the activities of Sharia Banks in Indonesia or would not increase the financing and qordul hasan portions as well as zakat-infaq-sodaqoh and social activities. Third, the implementation of sharia principles had an insignificant influences on the employee welfare of Sharia Banks at α = 0.05 with path coefficient of -0.03 and p value of 0.942, maintaining that the implementation of sharia principles in Sharia Banks in Indonesia which is getting better, more consistent and more sustainable would not improve the employee welfare of Sharia Banks. Fourth, the Sharia Bank performance had an influence on the welfare of society involved in the activities of Sharia Banks in Indonesia at α = 0.05 with path coefficient of 1.24 and p value of 0.034, revealing that an excellent performance of Sharia Bank would, in turn, improve the welfare of society involved in the activities of Sharia Banks in Indonesia.. Fifth, the Sharia Bank performance had a significant influence on the employee welfare at α = 0.05 with a path coefficient of 1.01 and p value of 0.027, explaining that an excellent performance of Sharia Bank would also improve the employee welfare in Sharia Banks in Indonesia.
Other findings showed an indirect effect, i.e., the implementation of sharia principles with the bank performance as the intervening variable, had a positive and significant influences on the employee welfare, with a path coefficient value (indirect effect) 0.96, suggesting that the implementation of sharia principles in Sharia Banks in Indonesia which has been getting better, more consistent and more sustainable, would result in the higher the bank performance. The higher the bank performance would, in turn improve the employee welfare of Sharia Bank. The implementation of sharia principles with the bank performance as intervening variable had a positive and significant influences on the society welfare, with a path coefficient value (indirect effect) 1.18, indicating that the implementation of sharia principles in Sharia Banks in Indonesia which has been getting better, more consistent and more sustainable, would result in the higher bank performance. The higher bank performance would, in turn, improve the welfare of society involved in the activities of Sharia Banks in Indonesia.
Based on the findings of the research, it can be concluded that the implementation of sharia principles in Sharia Banks in Indonesia which has been getting better, more consistent and more sustainable would, in turn, improve the bank performance. Moreover, the excellent of the bank performance would exert a significant effect on the welfare of employees and society involved in the activities of Sharia Banks in Indonesia.