The Influence of Capital Adequacy Ratio (CAR) and Non Performing Loan (NPL) on Return on Assets (ROA) of Islamic Banking in Indonesia for the Period 2009-2023

Abstract

This study aims to analyze the effect of Capital Adequacy Ratio (CAR) and Non Performing Loan (NPL) on Return on Assets (ROA) in Islamic banking in Indonesia for the period 2009-2023. The data used in this study are secondary data obtained from the annual reports of Islamic banks registered with the Financial Services Authority (OJK). The method used in this study is multiple linear regression to test the effect of CAR and NPL on ROA. The results of the study indicate that CAR has a significant positive effect on ROA, meaning that an increase in CAR can increase ROA in Islamic banks. However, NPL does not show a significant effect on ROA, although it has a negative relationship. The regression model used has an R-square value of 0.538, which indicates that CAR and NPL can explain around 53.8% of the variation in ROA. This finding shows the importance of capital adequacy management in improving the financial performance of Islamic banks, while NPL management also needs to be considered even though its impact is not significant in this study