This study examines the effect of Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), board of directors’ size (BOARD), sharia supervisory board (DPS), bank size (SIZE), and interest rate (INT) and sharia bank ownership status (DFOR) to Return on Deposit (ROD). The sample used in this research is 11 sharia banks operating in Indonesia. By using multiple regression analysis technique, it was found that CAR and SIZE have a significant negative effect on ROD) of sharia banks in Indonesia. While the FDR, BOARD and INT have a significant positive effect on ROD of sharia banks in Indonesia. Meanwhile, DPS and DFOR have no significant effect on ROD of sharia bank in Indonesia.
Islamic banking (sharia banking) arises because Islam forbids Muslims to withdraw or pay interest (usury,
In Indonesia, sharia banking is still relatively early. The first sharia bank in Indonesia was Bank Muamalat which was established in 1992. The phenomenon of sharia banks became more attractive when sharia banks survived successfully during the Asian financial crisis of 1997–1998 and the global financial crisis 2007–2008, at which time banks conventional facing financial difficulties even to failure.
The purpose of establishing a sharia bank is the same as that of the company in general, that is, to make a profit. But for sharia banks, this profit is earned through investment returns that will increase owner wealth. This goal is not only a reference of the owner of sharia banks but also depositors who participate in investing funds in the investmentbased revenue sharing. The level of profitability is the main reference for depositors in considering whether to stay in the bank or move the funds to other banks (
Deposits become one of the Islamic instruments based on profit sharing and profit sharing rates of these deposits is very important to note to compete with conventional banks and other Islamic banks. The rate of return on these deposits becomes the main reference for depositors in considering whether to stay in the bank or transfer funds to other banks. One measure of profitability relating to sharia banks is Return on Deposit (ROD) but not much research involving to Return on Deposit (ROD) as dependent variable to proportion the probability of sharia bank, especially in Indonesia. Though ROD is a reflection of the fulfillment of the principle of profit sharing (
Some research on ROD has been done, for example,
Research conducted by
Therefore, this study will focus on factors that may affect the ROD. The factors which have been analyzed in this research are Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), Board of Director, Sharia Supervisory Board, Bank size, and interest rate and Sharia Bank ownership status. These factors are studied further because of the inconsistency of the research results related to the effect on ROD.
According to
The detailed explanation about the sharia bank’s principles are explain in the next section.
To be considered as a sharia bank, bank must certainly run its business that adheres to the principles of Islamic banks that are allowed in Islam. This sharia principle then becomes a feature that differentiates sharia banks with conventional banks. Wirdyaningsih et al. (
The most common profitability ratios used in Sharia Banks are Return on Deposit (ROD), Return on Assets (ROA), Return on Equity (ROE). Return on Deposit (ROD) represents the rate of return earned from total investment deposits managed by sharia banks (
This section will described the research method used in this study. Population and sample, data collection method, hypothesis development and analytical technique discussed in this section.
The population in this research is sharia bank that operated in Indonesia. Not all sharia banks in Indonesia are subject to this research because there are sharia banks that do not meet the criteria of the research. Therefore, the research sample was chosen by using purposive sampling method, where the sampling according to criteria as follows: (1) Sharia Banks in the form of standalone entities (Sharia Commercial Banks); (2) Sharia banks that have been established from 2011 to 2015; (3) Sharia bank that has completed the information in the 2011–2015 period of financial statements that is audited and adequate for the research and has been published either on the site of sample banks or on the website of Bank Indonesia.
In Table
Based on the above criteria, there are 11 sharia banks which are adequate to be the object of this research. The names of the bank becoming the sample can be seen on the Table
Sampling process
No  Criteria  Total 
1  Sharia banks in form of standalone entities in Indonesia  12 
2  Sharia banks which have been operated in time of this research  11 
3  There is an adequate information in financial report for the period of 2011–2015 audited, and proper for the research and have been published either on the bank site or Bank Indonesia site  11 
Bank samples
No  Sharia banks  Website 
1  Bank Muamalat Indonesia 

2  Bank Victoria Syariah 

3  BRI Syariah 

4  BPD Jawa Barat Banten Syariah 

5  BNI Syariah 

6  Bank Syariah Mandiri 

7  Bank Mega Syariah Indonesia 

8  Bank Panin Syariah 

9  Bank Syariah Bukopin 

10  BCA Syariah 

11  Bank Maybank Syariah 

The data used in this research is secondary data. Data obtained from external sources through the website of Bank Indonesia is
This section will focus on the hypothesis development. Some arguments for each hypothesis development discussed as follows.
According to
According to
H1: CAR has positive effect on ROD of sharia bank
Financing to Deposit Ratio (FDR) is a ratio similar to the Loan to Deposit Ratio (LDR) in a conventional bank. This ratio is used to measure the extent to which loan funds are sourced from the third parties. This low ratio shows the level of liquidity of the bank so that if the higher the size of an Islamic bank’s FDR illustrates a less liquid state than a sharia bank with a lower FDR size. Conversely, the lower the size of the FDR of an Islamic bank, the bank can maintain an excessive liquidity tool and will cause pressure on the income of Islamic banks in the form of high cost of maintenance of idle cash (
H2: FDR has positive effect on ROD of sharia bank
H3: The size of the board of director has a positive effect on ROD of sharia banks
H4: Sharia Supervisory Board has a positive effect on ROD of sharia banks
According to
H5: Asset size positively affects return on investment of sharia bank
Both Islamic banks and conventional banks compete in obtaining deposits. Islamic banks face the intense competition against conventional banks because conventional banks offer guaranteed returns in the form of a fixed interest rate. Islamic banks may refer to interest rates if they can not obtain benchmark yields offered in a profitsharing transaction
H6: Bank interest rates have a positive effect on ROD of sharia banks
H7: Foreignowned sharia banks have higher ROD than domestic sharia banks
The analytical technique used in this study used multiple linear regression with dummy variable included. The regression equation in this research is
ROD_{it} = α + β1CAR_{it} + β2FDR_{it} + β3BOARD_{it} + β4DPS_{it} + β5SIZE_{it} + β5INT_{it} + β6 DFOR_{it} + ε_{it} .
ROD_{it} = Return on Deposit (ROD) sharia bank
CAR_{it} = Capital Adequacy Ratio (CAR) sharia bank
FDR_{it} = Financing to Deposit Ratio (FDR) sharia bank
ROD_{it} = Return on Deposit (ROD) sharia bank
BOARD_{it} = directors, size
DPS_{it} = Sharia Supervisory Board
SIZE_{it} = The size of sharia bank
DFOR_{it} = Dummy of foreign ownership
α = constant
β(1–6) = regression coefficient
The operational definition of variables are shown in Table
The Operational Definition of Variables
Name of Variable  Measurements  Variable 
Return on Deposit (ROD)  (The Capital of Bank / Total of deposit investment) × 100%  Dependent 
Capital Adequacy Ratio (CAR)  (The Capital of Bank / RiskWeighted Asset) × 100%  Independent 
Financing to Deposit Ratio (FDR)  (Total Funding / Third Party Foun) × 100%  Independent 
The size of board of director (BOARD)  Number of board of director’s member  Independent 
Sharia Supervisory Board (DPS)  Number of Sharia Supervisory Board’s member  Independent 
The size of the bank (SIZE)  Ln Total asset  Independent 
The interest (INT)  The average of deposit of the conventional banks in a year  Independent 
Foreign ownership Dummy (DFOR)  1 = sharia foreign banks; 0 = sharia domectic banks  Independent 
Hypothesis testing in this study includes F test, ttest, and test coefficient of determination (R²). Before testing the hypothesis, the classical assumption test will be done first.
The result and discussion consists of descriptive statistics, the result of classical assumption tests, the result of multiple regression analysis, and discussion. Each section described as follows.
Descriptive statistics provides the descriptions of data viewed from the mean, standard deviation, variance, maximum, and minimum values. This study uses a 5year observation period from 2011 to 2015. The data on dependent, independent, and control variables are obtained from the financial statements of sharia banks obtained from the website of Bank Indonesia or the website of the sharia bank concerned. The specific interest rate variables are obtained from Sharia Bank Statistics obtained from the Indonesian Financial Services Authority website. In Table
Descriptive statistics (source: secondary data, processed)
N  Minimum  Maximum  Mean  Std. Deviation  
ROD (%)  55  2.47  11.06  5.84  1.85 
CAR (%)  55  11.03  73.44  23.32  14.96 
FDR (%)  55  46.08  289.20  99.52  34.99 
SIZE (million)  55  642,026  70,369,708  15,429,901  130,218 
BOARD (person)  55  3  7  4  .9993 
DPS (person)  55  2  3  2  .4664 
INT (%)  55  6.05  8.76  7.47  1.05 
The ROD variable shows the percentage of return on each Rupiah of customer deposits. In other words, this ratio indicates the effectiveness of sharia banks that converting deposits into profits is one measure of the profitability of sharia banks. ROD represents the rate of return earned from the total investment deposits managed by sharia bank. Of the overall ROD, sample shows an average of 5.845%, indicating that the average of the total sample has total assets of 218.43% compared with current liabilities. The highest ROD level obtained by Bank BJB Syariah in 2015 amounted to 11.06% while the smallest ROD level of Maybank Syariah Bank in 2012 amounted to 2.47%. The standard deviation of the ROD variable is smaller than the average indicating that the ROD variable data is spread fairly evenly.
CAR variables measure the capital adequacy of banks to measure the adequacy of capital owned by banks to support assets that contain risks. In other words, CAR is the bank’s performance ratio to measure the capital adequacy of a bank to support assets that contain or generate risk. It can be seen that the average CAR of the total sample is 23.317% indicating that the average sharia bank in Indonesia has fulfilled the minimum CAR requirement that is at least 8%. This 23.317% is far more than the minimum required. The standard deviation of this variable is also smaller than the average that is equal to 14.958% which indicates that the data of this variable is spread evenly. The largest CAR is owned by Bank Maybank Sharia in 2015 amounted to 73.44% while the smallest CAR owned by Bank Muamalat in 2012 amounted to 11.03%. Although CAR is the smallest among sharia banks in Indonesia, it still meets the minimum required CAR of Islamic banks by 8%.
The FDR variable is the ratio used to measure the liquidity of a bank in repaying the withdrawal of funds by the depositor. This variable is used to measure how far the ability of banks to repay the withdrawal of funds made by depositors by relying on the financing provided as a source of liquidity. Therefore, the FDR is calculated by comparison between the financing provided by the sharia bank and the third party funds which has successfully been deployed by the sharia bank; it can be seen from the above table the average FDR of the total sample is 99.52%. This figure is still within reasonable limits given that the ideal range is 80–100%. The standard deviation of this variable is smaller than the average of 34.99% indicating that the data of these variables are spread evenly. The largest FDR rate obtained by Maybank Sharia in 2011 was 289.20%, while the smallest FDR rate was owned by Bank Victoria Sharia in 2011 amounting to 46.08%.
The board of directors’ size in this study shows how many members of the board of directors in Islamic banks. Therefore, it is proxied by the number of members in the board of directors of sharia banks. In the descriptive statistics Table
The Sharia Supervisory Board’s size variables show how many members of the Sharia Supervisory Board are at sharia banks in Indonesia. This is to investigate the extent to which the number of Sharia Supervisory Board is effective in carrying out its duties to oversee the daily operations of banks to always comply with the provisions of sharia and to provide innovations of sharia products that can improve the performance of Islamic banks. From Table
The variable size of the bank shows the size of a company shown by total assets, total sales, average total sales and average total assets so that it can be concluded a size of a bank can be said big if seen from the amount of the assets owned. The natural logarithm of total assets is used as a proxy for the independent variable of bank size. Natural logarithm is used to overcome the problem of value disparity (
The interest rate variable is proxied by the average of the conventional interbank deposit rate in Indonesia with a period of one year. Islamic banks may refer to the interest rate if they cannot obtain the benchmark yield offered in the profitsharing transaction (
Classical assumption tests consists of normality test, multicollinearity test, and heteroscedasticity test. The results of each test, described as follows.
KolmogorovSmirnov nonparametric statistical test is used to detect whether residuals are normally distributed or not (
The test showing the level of significant value .200, this value is above .05. This shows that the residual data is distributed normally.
This test is performed to detect whether in the regression model found the correlation between independent variables. To analyze the presence of multicollinearity is indicated by a correlation value greater than 95% and can also be indicated through the tolerance value ≤ 0.01 and VIF value ≥10 (
Multicollinearity testing result (source: secondary data, has been processed)
Variable  Collinearity Statistics  
Tolerance  VIF  
CAR  .298  3.359 
FDR  .414  2.413 
SIZE  .339  2.948 
BOARD  .446  2.243 
DPS  .576  1.737 
INT  .926  1.079 
DFOR  .235  4.249 
In Table
Heteroscedasticity test is performed to test whether there are unequal variances of the residual to other observations on the regression model used (
The result of the Glejser test fo heteroscedasticity (source: secondary data, has been processed)
Variable 


CAR  .918  .360 
FDR  1.887  .066 
SIZE  .982  .332 
BOARD  –.859  .391 
DPS  1.010  .319 
INT  –.132  .896 
DFOR  .953  .347 
Based on Table
Based on the testing of the classical assumption that has been done, it can be concluded that this research model has fulfilled all the classical assumptions. The next step that can be done is to perform hypothesis analysis by using multiple linear regression analysis method with Ordinary Least Square model. The analysis aims to test the influence of independent variable to dependent variable. In this research, multiple regression analysis is used to test the effect of CAR, FDR, the board of directors, Sharia Supervisory Board, bank size, and interest rate on Return on Deposit (ROD) of sharia bank by adding foreign bank ownership variable as dummy variable. This analysis is done by regression model as follows:
ROD_{it} = α + β1 CAR_{it} + β2FDR_{it} + β3BOARD_{it} + β4DPS_{it} + β5SIZE_{it} + β5INT_{it} + β6 DFOR_{it} + ε_{it} .
The result of the regression analysis can be seen in Table
The Result of Multiple Linear Regression Analysis (source: secondary data, has been processed)
Model  Unstandardized Coefficients  Standardized Coefficients  t  p.  
B  Std. Error  Beta  
(Constant)  26.503  5.233  5.064  .000  
CAR  –.071  .018  –.575  –3.977  .000 
FDR  .017  .006  .316  2.580  .013 
BOARD  .441  .219  .238  2.017  .049 
DPS  .411  .413  .104  .995  .325 
SIZE  –1.090  .193  –.767  –5.660  .000 
INT  1.188  .144  .675  8.227  .000 
DFOR  –1.690  1.037  –.265  –1.629  .110 
Adjusted R^{2}: 0.644 
A regression model formed from the Table
ROD_{it} = 26.50 – .071CAR_{it} + .17FDR_{it} + .441BOARD_{it} + .411DPS_{it} – 1.090SIZE_{it} + 1.188INT_{it} – 1.690DFOR_{it} + ε_{it} .
A testing based on the model shows that the variable of FDR, BOARD, and INT have a significant positive effect to ROD variable. Variable CAR and SIZE have a significant negative effect to ROD variable. Whereas DPS variable does not affect ROD. DUMMY variable shows significant negative sign which means that foreign sharia banks are no better than domestic sharia banks in obtaining ROD.
Based on the result of the analysis, it is obtained a coefficient of determination of .664. This indicates that 66.4% of the dependent variable on the model, which consists of CAR, FDR, board size (BOARD), size of Sharia Supervisory Board (DPS), bank size (SIZE), interest rate (INT), and foreign ownership (DFOR). While the rest of 33.6% is explained by the variables outside the model.
F test is used to show whether all independent variables simultaneously affect the dependent variable. Based on the results of the analysis, it is obtained the value of F of 16.221 with a probability of .000. Since the probability is much less than .05, the regression model can be used to predict ROD.
Based on Table
The effect of each independent variables toward ROD are described as follows.
CAR has a significant negative effect on ROD. This can be seen from the significant value of .000 which is smaller than .050. The value of the CAR variable regression coefficient is –.71, meaning if the CAR variable has increased by one unit, while the other independent variable is considered constant (value 0), then ROD will experience decrease of .71. This result is inconsistent with the research conducted by
This study provides an evidence that sharia banks in Indonesia have not guaranteed a higher return on excessive risktaking. The negative result indicates that the larger, the smaller CAR of ROD obtained by sharia banks in Indonesia. This condition can be seen from Figure
The Average of ROD and CAR on Sharia Bank in Indonesia (source: the financial repot of bank sample)
FDR has a significant positive effect on ROD. This result is in line with
The Board size (BOARD) has a negative and significant effect on ROD. The result of this study is in line with the result of the research conducted by
The size of the Sharia Supervisory Board (DPS) has no significant effect on ROD. This result does not support the results of the research conducted by
The size of the bank (SIZE) has a negative and significant influence on ROD. This result does not support the research conducted by
The study found that interest rates (INT) had a significant positive effect on ROD. The results of this study support
This study found that the ownership status (DFOR) of sharia banks did not have a significant effect on ROD. The results of this study are in line with
This section discussed the conclusion and suggestion made based on the results of this study.
This study aims to examine the factors that affect the Return on Deposit (ROD) on Islamic banks in Indonesia. These factors include Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), the size of directors, the size of the Sharia Supervisory Board, the size of the bank, and the interest rate. The study also adds a dummy variable to see if there are significant differences in ROD obtained in sharia banks regarding ownership status, i.e., foreign ownership and domestic ownership. The results of this study indicate that not all variables studied have a significant influence on ROD. Capital Adequacy Ratio (CAR) and bank size (SIZE) have a significant negative effect on Return on Deposit (ROD) on sharia bank in Indonesia. While the FDR, the size of directors and interest rates have a significant positive effect on Return on Deposit (ROD) in Islamic banks in Indonesia. Meanwhile, Sharia Supervisory Board and foreign ownership sizes have no significant effect on Return on Deposit (ROD) on sharia bank in Indonesia.
This study has some limitations among other samples which have been studied. It is also limited to sharia banks in the form of sharia public banks where it does not involve sharia financing banks. Therefore, a future research needs to specifically conduct to study on sharia financing banks. Depositors in sharia banks do not need to consider the size of the sharia supervisory board and the bank’s ownership status in depositing the funds since the size of the sharia supervisory board does not affect the ROD and there is no difference between foreign and domestic sharia banks. However, depositors need to consider the CAR, bank size, FDR, the size of the board of directors and the prevailing interest rate because it has a significant impact. The depositor should choose sharia banks with high FDR and well managed (i.e. have bigger board size to ensure good corporate governance implementation). The depositor also suggested to consider sharia banks with smaller size because it can provide better return on deposit, but again some consideration, i.e. risks must concerned.