Analysis of Maqashid Shariah Implementation in the Financial Performance of Islamic Rural Banks (BPRS) in Indonesia
https://doi.org/10.35877/454RI.daengku4421
Keywords:
Maqashid Shariah, BPRS, financial performance, Islamic banking, welfare outcomes
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Abstract
Abstract
This study examines the application of Maqashid Shariah within the financial performance framework of Islamic Rural Banks (BPRS) in Indonesia by evaluating the extent to which profitability, operational efficiency, liquidity management, and credit risk influence Maqashid Shariah outcomes. Using panel data from 2015–2024 and employing the EViews regression approach, the research integrates both financial indicators and the Maqashid Shariah Index to measure the alignment of BPRS operations with the objectives of Shariah, including the preservation of wealth, promotion of justice, development of human capability, and enhancement of social welfare. The findings show that profitability significantly improves Maqashid Shariah performance, demonstrating that financial strength enables banks to invest more extensively in welfare-oriented initiatives. Liquidity efficiency, measured through Financing to Deposit Ratio (FDR), also displays a positive influence, indicating that productive financing contributes to community empowerment and financial inclusion. Conversely, operational inefficiency and high non-performing financing reduce the bank’s ability to deliver Shariah-driven outcomes, reflecting the importance of cost management and risk governance. Overall, the results highlight that financial sustainability and Maqashid Shariah are mutually reinforcing rather than competing objectives. The study underscores the need for BPRS to strengthen governance, improve risk management, and adopt strategic innovations to optimize their contribution to ethical and welfare-driven economic development. The findings have implications for policymakers, regulators, and practitioners seeking to enhance the role of Islamic rural banks in advancing Shariah-compliant socio-economic transformation.
Keywords: Maqashid Shariah, BPRS, financial performance, Islamic banking, welfare outcomes.
References
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Abubakar, U., Hassan, S., & Haron, R. (2020). Credit risk and social welfare performance of Islamic banks. Journal of Islamic Accounting and Business Research, 11(5), 1077–1094. https://doi.org/10.1108/JIABR-09-2018-0145
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Ahmad, N., & Rusdianto, I. (2020). Regional disparities in Islamic bank performance assessment. International Journal of Islamic Business Ethics, 5(1), 35–50.
Ahmad, W., & Omar, M. (2016). Cost efficiency and social outreach of Islamic financial institutions. Pacific- Basin Finance Journal, 40, 59–72. https://doi.org/10.1016/j.pacfin.2016.06.004
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Ahmed, S., & Haron, R. (2022). Financial performance determinants of Islamic banks: A comparative analysis. Journal of Islamic Accounting and Business Research, 13(4), 721–739.
Akhtar, M. H., Hussain, H., & Saeed, A. (2021). Financial resilience and outreach in Islamic microfinance institutions. Journal of Islamic Accounting and Business Research, 12(4), 587– 605. https://doi.org/10.1108/JIABR-12-2019-0235
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Dusuki, A. W., & Abozaid, A. (2016). Maqasid al-Shariah and Islamic finance: An appraisal. ISRA International Journal of Islamic Finance, 8(2), 193–212.
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Hameed, S., & Alwi, S. F. (2019). Value-based intermediation and socio-economic impact in Islamic microfinance. Humanomics, 35(4), 593–610.
Hamid, A., Aziz, M. R., & Sanusi, S. (2022). Measuring welfare performance using Maqasid Shariah
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Hasan, R., Aziz, N. A., & Ghani, M. (2023). Integrating welfare-based principles into Islamic
microfinance evaluation models. Journal of Islamic Economics, 17(1), 89–108.
Hassan, M. K., & Aliyu, S. (2018). A contemporary survey of Islamic banking literature. Journal of Financial Stability, 34, 12–43.
Hassan, M. K., Aliyu, S., Paltrinieri, A., & Khan, A. (2019). Islamic banking, sustainability and financial performance. Journal of Financial Stability, 44, 100695. https://doi.org/10.1016/j.jfs.2019.100695
Hassan, M., & Muneeza, A. (2022). Digital transformation in Islamic finance: Opportunities and challenges. Journal of Islamic Financial Studies, 8(3), 189–206.
Hidayat, F., Zulfikar, M., & Ramadhan, I. (2021). Contextual performance evaluation for Indonesian Islamic banks. Jurnal Keuangan Syariah, 5(2), 90–104.
Huda, N., & Idris, H. (2019). Islamic bank social responsibility and Maqasid compliance.
International Journal of Ethics and Systems, 35(3), 389–404. https://doi.org/10.1108/IJOES-05-2018-0080
Huda, N., & Rini, N. (2020). Credit risk mitigation and welfare outcomes in Islamic microfinance.
Economic Modelling, 93, 530–544. https://doi.org/10.1016/j.econmod.2020.08.013
Ismail, A. G., & Possumah, B. T. (2020). Islamic microfinance and community resilience. International
Journal of Social Economics, 47(3), 405–420.
Ismail, A. G., Noor, A. H., & Ghazali, M. F. (2022). Revisiting Maqasid Shariah Index for contemporary Islamic banking performance. Journal of Islamic Accounting and Business Research, 13(7), 1023–1041.
Jaafar, H., Aziz, S. A., & Khalid, M. (2022). Financial inclusion and Islamic microfinance performance. Journal of Islamic Marketing, 13(6), 1324–1340.
Karbhari, Y., Muye, I. M., & Hasan, R. (2021). The role of Islamic banks in rural economic development. International Journal of Economics and Management, 15(2), 247–263.
Kassim, S. (2022). Islamic finance and sustainable development: Empirical evidence from ASEAN. Journal of Sustainable Finance & Investment, 12(4), 1003–1020.
Kassim, S. H., & Majid, M. S. A. (2020). The role of profitability in enhancing Islamic banks’ social impact. International Journal of Islamic and Middle Eastern Finance and Management, 13(3), 509–526. https://doi.org/10.1108/IMEFM-08-2019-0332
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Khatun, M., Hassan, M. K., & Rashid, M. (2023). A re-evaluation of Maqasid al-Shariah performance metrics in Islamic finance. International Journal of Islamic and Middle Eastern Finance and Management, 16(4), 721–743.
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Mohammed, M. O., & Shahwan, S. (2018). The objective of Islamic banking based on Maqasid Shariah. Journal of Islamic Accounting and Business Research, 9(2), 109–126. https://doi.org/10.1108/JIABR-01-2016-0004
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Muneeza, A., & Mustapha, Z. (2020). Social value creation through Islamic microfinance. ISRA International Journal of Islamic Finance, 12(1), 1–12. https://doi.org/10.1108/IJIF-07-2018- 0081
Nadzri, F. A., Rahman, R. A., & Omar, N. (2020). Financing inclusiveness and social value of Islamic banks. Journal of Islamic Marketing, 11(3), 811–829.
Nawaz, T., & Haniffa, R. (2021). Do Shariah governance mechanisms enhance Islamic banks’ transparency? Journal of Business Ethics, 170(1), 129–144.
Ogunbado, A. F., Ahmad, H., & Rani, N. (2023). Performance measurement frameworks in Islamic banking: A contemporary evaluation. International Journal of Islamic Economics and Finance Studies, 9(1), 44– 60.
Omar, M., Abdullah, R., & Ali, S. (2022). Institutional capacity and value creation in Islamic microfinance. International Journal of Finance & Economics, 27(4), 4128–4144. https://doi.org/10.1002/ijfe.2309
Othman, A., Nasir, R., & Wahab, N. A. (2019). Maqasid-based performance model for Islamic banks. International Journal of Islamic Economics and Finance Studies, 5(1), 17–34.
Putra, I. M., & Setiawan, A. (2022). Maqasid-based performance of Indonesian rural Islamic banks. International Journal of Islamic Economics and Finance Studies, 8(2), 54–73. https://doi.org/10.54254/ijisef.2022.8.2
Rabbani, M. R., Ali, M., & Khan, S. (2021). Digital innovation and Shariah-based financial inclusion. Journal of Islamic Marketing, 12(3), 482–500. https://doi.org/10.1108/JIMA-05-2019-0100
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Rahim, S., & Osman, A. F. (2020). Shariah governance quality and institutional performance. International Journal of Islamic Economics and Finance Studies, 6(2), 45–62.
Rahman, A. A. (2021). Maqasid al-Shariah and contemporary Islamic finance. International Journal of Islamic Economics and Finance, 4(1), 1–17. https://doi.org/10.18196/ijief.v4i1
Razak, D., Hassan, M. K., & Rabbani, M. R. (2022). Digitalization, financial performance, and social value creation in Islamic banking. Journal of Islamic Marketing, 13(6), 1324–1342. https://doi.org/10.1108/JIMA-03- 2020-0071
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Siraj, S., & Nugraha, D. (2024). Region-based Maqasid Shariah performance assessment. Journal of Islamic Management Studies, 8(1), 44–59.
Sofyani, H., Yuliani, N., & Fahlevi, M. (2021). The role of Islamic microfinance in inclusive development. Journal of Asian Finance, Economics and Business, 8(5), 839–849.
Sraiyawag, N., & Fahlevi, M. (2024). Adaptation of Maqasid Shariah Index for Islamic microfinance institutions. Journal of Islamic Economics Studies, 8(1), 15–32.
Sudarsono, H., & Nugroho, A. (2020). Islamic banks and rural economic performance. Jurnal Ekonomi Syariah, 12(2), 97–110.
Syed, A., Yusuf, M., & Idris, F. (2022). Justice-oriented performance assessment in Islamic microfinance institutions. Journal of Islamic Accounting and Business Research, 13(8), 1452– 1470.
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Abdullah, R., & Razak, S. H. A. (2020). Measuring Islamic bank performance using Maqasid Shariah framework. International Journal of Islamic and Middle Eastern Finance and Management, 13(3), 421–439. https://doi.org/10.1108/IMEFM-01-2019-0003
Abrar, A., & Hasan, M. (2023). A maqasid-based assessment of Islamic financial institutions. Journal of Islamic Accounting and Business Research, 14(2), 315–332. https://doi.org/10.1108/JIABR-09-2021-0253
Abubakar, L., & Handayani, T. (2021). Islamic microfinance and socio-economic empowerment. Journal of Islamic Finance, 10(2), 55–70.
Abubakar, U., Hassan, S., & Haron, R. (2020). Credit risk and social welfare performance of Islamic banks. Journal of Islamic Accounting and Business Research, 11(5), 1077–1094. https://doi.org/10.1108/JIABR-09-2018-0145
Adegbite, E., & Al-Faki, M. (2021). Regulatory frameworks and ethical governance in Islamic finance. Journal of Business Ethics, 170(3), 545–562. https://doi.org/10.1007/s10551-020-04639-7
Ahmad, N., & Rusdianto, I. (2020). Regional disparities in Islamic bank performance assessment. International Journal of Islamic Business Ethics, 5(1), 35–50.
Ahmad, W., & Omar, M. (2016). Cost efficiency and social outreach of Islamic financial institutions. Pacific- Basin Finance Journal, 40, 59–72. https://doi.org/10.1016/j.pacfin.2016.06.004
Ahmed, H., Mohieldin, M., & Verbeek, J. (2019). Leveraging Islamic finance for inclusive growth and SDGs. Journal of Islamic Accounting and Business Research, 10(5), 708–725.
Ahmed, S., & Haron, R. (2022). Financial performance determinants of Islamic banks: A comparative analysis. Journal of Islamic Accounting and Business Research, 13(4), 721–739.
Akhtar, M. H., Hussain, H., & Saeed, A. (2021). Financial resilience and outreach in Islamic microfinance institutions. Journal of Islamic Accounting and Business Research, 12(4), 587– 605. https://doi.org/10.1108/JIABR-12-2019-0235
Alam, M. K., Akbar, M., & Shahriar, S. (2019). Shariah governance and its impact on Islamic banks’ performance. International Journal of Islamic and Middle Eastern Finance and Management, 12(3), 327–347.
Ali, S., & Hassan, M. K. (2021). Operational performance and ethical value creation in Islamic banking. International Review of Economics & Finance, 75, 556–568. https://doi.org/10.1016/j.iref.2021.04.017
Antonio, M. S., Sanrego, Y. D., & Taufiq, M. (2020). Islamic bank performance: Between profit and maqasid. International Journal of Islamic Economics and Finance Studies, 6(1), 23–45. https://doi.org/10.25272/ijisef.2020.6.1
Ascarya, A., & Yumanita, D. (2018). The role of Sharia governance in reducing financing risk. Journal of Islamic Monetary Economics and Finance, 4(2), 223–244. https://doi.org/10.21098/jimf.v4i2.1020
Bahari, M. S., Isa, M., & Razak, D. A. (2024). A multidimensional framework for assessing welfare-based Islamic bank performance. Journal of Islamic Accounting and Business Research, 15(1), 66–84.
Baharuddin, R., Adnan, A., & Ibrahim, M. (2023). Assessing welfare-based performance of Islamic microfinance institutions. Asian Journal of Islamic Management, 7(2), 112–129.
Banna, H., & Varghese, T. (2021). Cost efficiency and social performance of Islamic microfinance institutions. Journal of Islamic Accounting and Business Research, 12(7), 1043–1062. https://doi.org/10.1108/JIABR-11-2020-0377
Banna, H., Ali, R., & Hassan, M. (2023). The role of digitalization in enhancing Shariah compliance. Journal of Financial Services Marketing, 28(1), 45–59.
Belal, A., Parvez, M., & Rahman, S. (2020). Maqasid al-shariah and corporate sustainability in Islamic banks. Journal of Islamic Business Research, 12(1), 54–70.
Choudhury, M. A., & Hoque, M. (2023). Maqasid al-Shariah and the SDGs: A conceptual linkage. Journal of Islamic Economics, Banking and Finance, 19(1), 1–18.
Dusuki, A. W., & Abozaid, A. (2016). Maqasid al-Shariah and Islamic finance: An appraisal. ISRA International Journal of Islamic Finance, 8(2), 193–212.
Fauziah, N., & Hassan, R. (2021). Risk management and Shariah compliance in Islamic microfinance. Journal of Islamic Marketing, 12(8), 1452–1471. https://doi.org/10.1108/JIMA-02-2020-0045
Grassa, R., & Gazdar, K. (2019). Corporate governance and Islamic bank social performance. Journal of Cleaner Production, 229, 949–958. https://doi.org/10.1016/j.jclepro.2019.05.017
Hameed, S., & Alwi, S. F. (2019). Value-based intermediation and socio-economic impact in Islamic microfinance. Humanomics, 35(4), 593–610.
Hamid, A., Aziz, M. R., & Sanusi, S. (2022). Measuring welfare performance using Maqasid Shariah
Index. Journal of Islamic Economics, 14(1), 55–72.https://doi.org/10.20885/jie.vol14.iss1.art4
Hasan, R., Aziz, N. A., & Ghani, M. (2023). Integrating welfare-based principles into Islamic
microfinance evaluation models. Journal of Islamic Economics, 17(1), 89–108.
Hassan, M. K., & Aliyu, S. (2018). A contemporary survey of Islamic banking literature. Journal of Financial Stability, 34, 12–43.
Hassan, M. K., Aliyu, S., Paltrinieri, A., & Khan, A. (2019). Islamic banking, sustainability and financial performance. Journal of Financial Stability, 44, 100695. https://doi.org/10.1016/j.jfs.2019.100695
Hassan, M., & Muneeza, A. (2022). Digital transformation in Islamic finance: Opportunities and challenges. Journal of Islamic Financial Studies, 8(3), 189–206.
Hidayat, F., Zulfikar, M., & Ramadhan, I. (2021). Contextual performance evaluation for Indonesian Islamic banks. Jurnal Keuangan Syariah, 5(2), 90–104.
Huda, N., & Idris, H. (2019). Islamic bank social responsibility and Maqasid compliance.
International Journal of Ethics and Systems, 35(3), 389–404. https://doi.org/10.1108/IJOES-05-2018-0080
Huda, N., & Rini, N. (2020). Credit risk mitigation and welfare outcomes in Islamic microfinance.
Economic Modelling, 93, 530–544. https://doi.org/10.1016/j.econmod.2020.08.013
Ismail, A. G., & Possumah, B. T. (2020). Islamic microfinance and community resilience. International
Journal of Social Economics, 47(3), 405–420.
Ismail, A. G., Noor, A. H., & Ghazali, M. F. (2022). Revisiting Maqasid Shariah Index for contemporary Islamic banking performance. Journal of Islamic Accounting and Business Research, 13(7), 1023–1041.
Jaafar, H., Aziz, S. A., & Khalid, M. (2022). Financial inclusion and Islamic microfinance performance. Journal of Islamic Marketing, 13(6), 1324–1340.
Karbhari, Y., Muye, I. M., & Hasan, R. (2021). The role of Islamic banks in rural economic development. International Journal of Economics and Management, 15(2), 247–263.
Kassim, S. (2022). Islamic finance and sustainable development: Empirical evidence from ASEAN. Journal of Sustainable Finance & Investment, 12(4), 1003–1020.
Kassim, S. H., & Majid, M. S. A. (2020). The role of profitability in enhancing Islamic banks’ social impact. International Journal of Islamic and Middle Eastern Finance and Management, 13(3), 509–526. https://doi.org/10.1108/IMEFM-08-2019-0332
Khan, M. N. A., & Zahid, M. (2022). Operational efficiency and social impact of Islamic banks. Emerging Markets Finance and Trade, 58(9), 2581–2594. https://doi.org/10.1080/1540496X.2021.1958460
Khatun, M., Hassan, M. K., & Rashid, M. (2023). A re-evaluation of Maqasid al-Shariah performance metrics in Islamic finance. International Journal of Islamic and Middle Eastern Finance and Management, 16(4), 721–743.
Laldin, M. A., & Furqani, H. (2019). Innovation vs. adherence: Rethinking Maqasid in Islamic finance.
ISRA International Journal of Islamic Finance, 11(1), 6–21.
Mansoori, M. T., & Zulkhibri, M. (2023). Maqasid Shariah and digital transformation in Islamic banking.Global Finance Journal, 56, 101793.
Mohamad, S., & Kassim, S. (2021). Maqasid-aligned Islamic banking and sustainable development. Journal of Islamic Accounting and Business Research, 12(8), 1183–1203.
Mohammed, M. O., & Shahwan, S. (2018). The objective of Islamic banking based on Maqasid Shariah. Journal of Islamic Accounting and Business Research, 9(2), 109–126. https://doi.org/10.1108/JIABR-01-2016-0004
Mohammed, M. O., & Taib, F. (2015). Developing Islamic banking performance metrics based on Maqasid Shariah. Journal of Islamic Monetary Economics and Finance, 1(1), 1–20.
Muneeza, A., & Mustapha, Z. (2020). Social value creation through Islamic microfinance. ISRA International Journal of Islamic Finance, 12(1), 1–12. https://doi.org/10.1108/IJIF-07-2018- 0081
Nadzri, F. A., Rahman, R. A., & Omar, N. (2020). Financing inclusiveness and social value of Islamic banks. Journal of Islamic Marketing, 11(3), 811–829.
Nawaz, T., & Haniffa, R. (2021). Do Shariah governance mechanisms enhance Islamic banks’ transparency? Journal of Business Ethics, 170(1), 129–144.
Ogunbado, A. F., Ahmad, H., & Rani, N. (2023). Performance measurement frameworks in Islamic banking: A contemporary evaluation. International Journal of Islamic Economics and Finance Studies, 9(1), 44– 60.
Omar, M., Abdullah, R., & Ali, S. (2022). Institutional capacity and value creation in Islamic microfinance. International Journal of Finance & Economics, 27(4), 4128–4144. https://doi.org/10.1002/ijfe.2309
Othman, A., Nasir, R., & Wahab, N. A. (2019). Maqasid-based performance model for Islamic banks. International Journal of Islamic Economics and Finance Studies, 5(1), 17–34.
Putra, I. M., & Setiawan, A. (2022). Maqasid-based performance of Indonesian rural Islamic banks. International Journal of Islamic Economics and Finance Studies, 8(2), 54–73. https://doi.org/10.54254/ijisef.2022.8.2
Rabbani, M. R., Ali, M., & Khan, S. (2021). Digital innovation and Shariah-based financial inclusion. Journal of Islamic Marketing, 12(3), 482–500. https://doi.org/10.1108/JIMA-05-2019-0100
Rahayu, F., Lubis, M., & Hasanah, U. (2024). Shariah governance and financial stability of Islamic microfinance institutions. Asian Journal of Islamic Management, 6(1), 12–25. https://doi.org/10.20885/ajim.vol6.iss1.art2
Rahim, S., & Osman, A. F. (2020). Shariah governance quality and institutional performance. International Journal of Islamic Economics and Finance Studies, 6(2), 45–62.
Rahman, A. A. (2021). Maqasid al-Shariah and contemporary Islamic finance. International Journal of Islamic Economics and Finance, 4(1), 1–17. https://doi.org/10.18196/ijief.v4i1
Razak, D., Hassan, M. K., & Rabbani, M. R. (2022). Digitalization, financial performance, and social value creation in Islamic banking. Journal of Islamic Marketing, 13(6), 1324–1342. https://doi.org/10.1108/JIMA-03- 2020-0071
Salleh, M. C. M., Ahmad, N., & Suhaimi, M. S. (2021). Barriers to Maqasid implementation in Islamic financial institutions. Journal of Islamic Management Studies, 5(1), 22–34.
Shafii, Z., Salleh, S., & Hanefah, M. (2015). Governance, accountability, and Shariah compliance in Islamic finance. Humanomics, 31(2), 195–212. https://doi.org/10.1108/H-06-2013-0042
Siraj, S., & Nugraha, D. (2024). Region-based Maqasid Shariah performance assessment. Journal of Islamic Management Studies, 8(1), 44–59.
Sofyani, H., Yuliani, N., & Fahlevi, M. (2021). The role of Islamic microfinance in inclusive development. Journal of Asian Finance, Economics and Business, 8(5), 839–849.
Sraiyawag, N., & Fahlevi, M. (2024). Adaptation of Maqasid Shariah Index for Islamic microfinance institutions. Journal of Islamic Economics Studies, 8(1), 15–32.
Sudarsono, H., & Nugroho, A. (2020). Islamic banks and rural economic performance. Jurnal Ekonomi Syariah, 12(2), 97–110.
Syed, A., Yusuf, M., & Idris, F. (2022). Justice-oriented performance assessment in Islamic microfinance institutions. Journal of Islamic Accounting and Business Research, 13(8), 1452– 1470.
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Published
2025-10-31
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How to Cite
M Andika Hariz Hamdallaha, Bambang Sukamto, & Bambang Sukamto. (2025). Analysis of Maqashid Shariah Implementation in the Financial Performance of Islamic Rural Banks (BPRS) in Indonesia. Daengku: Journal of Humanities and Social Sciences Innovation, 5(5), 653-669. https://doi.org/10.35877/454RI.daengku4421
Copyright (c) 2025 M Andika Hariz Hamdallaha, Bambang Sukamto, Bambang Sukamto
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