Intellectual capital and financial performance of islamic banks in Indonesia

This study analyses the impact of Islamic intellectual capital and Islamic financial performance on business sustainability of Islamic banks in Indonesia. For sustainability, Islamic banks face many challenges like: Products, development technology, and human capital competing with conventional banks and overcome problems in the ASEAN banking economy. To achieve this aim, the study uses a quantitative approach by collecting secondary data of Islamic banks focusing on three variables: Islamic intellectual capital, Islamic financial performance and business sustainability for the period from 2010-2016. The research used secondary data, from financial reports and annual reports. The data is taken from the internet and Infobank. A census method of Islamic banks in Indonesia is carried out. The data is tested and analysed using partial least squares regression. The results show that: 1) Islamic intellectual capital has a significant impact on Islamic financial performance, 2) Islamic intellectual capital has a significant impact on business sustainability, 3) Islamic financial performance has a significant impact on business sustainability, 4) Islamic financial performance partially mediates the impact of Islamic intellectual capital on business sustainability. Thus, Islamic banks in Indonesia must always develop their intellectual capital, so that Islamic banks in Indonesia will be able to competitive with foreign banks and will be sustainable. From the results of the study, it can be concluded that strengthening intellectual capital and performance improvement could improve the business sustainability of Islamic banks in Indonesia.