The Impact of The Covid-19 Pandemic on The Financial Performance of Islamic Rural Banks in Central Java

Abstract

Islamic Rural Banks have a priority scale in the real sector, which is solely dependent on economic conditions. Admittedly, the Covid-19 pandemic caused serious economic instability and Central Java is one of the regions in Indonesia most affected by the phenomenon. Therefore, this study aims to determine the impact of the Covid-19 pandemic on the financial performance of Islamic Rural Banks in Central Java using a descriptive quantitative approach. Based on purposive sampling, 23 Islamic Rural Banks in Central Java were selected as the research sample. The results of this study show that the Islamic Rural Bank in Central Java had very healthy capital and liquidity and this was determined by the quality of assets owned by the bank. However, it was observed that the profitability state of OER was not healthy while that of ROA was quite healthy. This proves that the Covid-19 pandemic caused a significant decrease in the various bank's ability to generate profits. To successfully face the potential risk of losing during events such as the Covid-19 pandemic, adequate capital is needed in the bank's reserve.The Islamic Rural Banks are more careful in terms of asset management to maintain the bank's healthy condition, therefore, they store adequate funds in their reserves to help them combat problems similar problems like this one. The practical implication of this research is that it will be useful for banking management, policy makers and users of banking services. Lastly, this research provides information that can be used by regulators in formulating appropriate policies to minimize the adverse effects of Covid-19.