The First International Credit Union Conference on Social Microfinance and Community Development, BKCU Kalimantan - Gunadarma University 111 Analysis of Financial Allocation and Its Impact on The Profitability of Islamic Banking In Indonesia Yogi Afrianto DR Imam Subaweh, SE., AK., MM Facultiy of Economic Gunadarma University Facultiy of Economic Gunadarma University yogi_ug@student.gunadarma.ac.id imas@staff.gunadarma.ac.id, Dini Tri Wardani Deboner Hillery Facultiy of Economic Gunadarma University Facultiy of Economic Gunadarma University neng_dini@student.gunadarma.ac.id deboner_hillery@student.gunadarma.ac.id Abstract The indicator that determines the successful of a bank is from the profitability of its bank. This research is analyzing the factors that determining the profitability of Sharia’s banking which proxy by ROA (return on assets).This research is using 3 sample of Sharia’s bank in period of 2006-2009 and using multiple regression analysis in order to examine where the Sharia’s banks must allocate their fund to enhance their profitability. The result is the deposit in Bank Indonesia, placement in other banks, and financing on small and medium enterprise don’t have any positive and significant influence to the profitability of Sharia bank while the investment in securities, financing on non small and medium enterprise have a negative and significant to the profitability of Sharia bank. Keywords : profitability bank (ROA), deposits in Bank Indonesia, placement in other banks, investment in securities, financing on small and medium enterprises, financing on non small and medium enterprise 1 Introduction Characteristics of Islamic banking system that op- erates on the principle of profit sharing provides an alternative banking system of mutual benefit for the community and the bank, and highlight as- pects of fairness in trade, ethical investment, pro- mote the values of togetherness and brotherhood in production, and avoid speculative activity in finan- cial transactions. By providing a variety of banking products and services that varied with the finan- cial scheme that is more varied, Islamic banking as an alternative banking system that is credible and can be enjoyed by all segments of society Indonesia without exception. Theoretically, the measure of achievement or per- formance of the bank, we can use some analysis, such as cost analysis, benefit analysis and financial statements analysis. Analysis can be used to inves- tigate how well the bank is operated. In the cost analysis, cost behavior can know a bank where the costs can be classified into several categories such as direct and indirect costs, operating expenses and non-operating expenses, and other major expenses, controlled and uncontrolled costs and so forth. Profits may also be from a bank operations fac- tor to obtain a profitable return. The activities may include deposit in Bank Indonesia, Placements in other banks, investment in securities, And Financ- ing on Small and Medium Enterprises; and Financ- ing on Non Small and Medium Enterprises. Seeing the principle purpose of Bank Sharia is concerned with making good of mankind and Fi- nancial Institutions Banking as a means of improv- ing quality of socio-economic life, increasing public participation in the development process especially in the economic field. According to these objectives Islamic Banking activities should not only seek prof- its, but also prosper society. Based on exposure above, it is interesting to an- alyze factors that determine the success of Islamic Banking and what factors that become problems on Non Performing Finance without losing the purpose of the Islamic Bank which is focusing on prosperity of their customers. 1.1 Identification Problem Based on the background, the performance of bank- ing can be seen by doing analysis activities of fund allocation. The financial allocation can be: deposit in Bank Indonesia, placements in other banks, in- vestment in securities, and financing on small and medium enterprises; and financing on financing on CORE Metadata, citation and similar papers at core.ac.uk Provided by Gunadarma University Repository