Journal of Modern Accounting and Auditing, ISSN 1548-6583 Vol. 10, No.2, February 2014. Office Channeling and Its Impact on the Growth of Indonesian Islamic Banking Industry M. Nur Rianto Al Arif SyarifHidayatullahState Islamic University, Jakarta, Indonesia The purpose of this paper is to analyze that the office channeling policy that based on Bank Indonesia’s rule No. 8/3/PBI/2006 had an impact on the growth of Islamic banking industry in Indonesia. This research used ordinary least square regression to analyze the impact of office channeling policy on the growth of Indonesian Islamic banking industry. The variable used in this paper is office channeling which is used as a dummy variable, and deposit margin and non-performing financing (NPF)are also used as control variables. The indicatorsof the growth of Indonesia Islamic banking industry are asset and third-party fund. The result shows that office channeling does not have an impact on the growth of Islamic banking industry which is measured by asset growth and third-party funds growth. According to this result, Bank Indonesia should have an innovative policy to stimulate the Islamic banking industry growth in Indonesia. Keywords:office channeling, asset, third-party fund, deposit margin, non-performing financing (NPF) Introduction The banking sectoris the heart oftheeconomic systemfrom the countryandis atoolin the implementation ofthe government’s monetarypolicy. Todetermine whether abankis in good shapeorin a state offinancial difficulties, there must be an assessment of the bank performance. Toassessthe performance ofthe bank,the bank’s financialstatements will be required, because thebank’s financialratios can be calculated based on the financialstatementsto assess thefinancial condition ofthe bankin the past, present, and more likelyin the future. The concept ofIslamic banking and finance,whichwas originallyjustatheoreticaldiscussion,has now become arealitythat growsanddevelopsas a fact. In fact, the currentIslamic banking industryhastransformedfromsimplyan alternativebankwithabankshariasystemthat is able toplay its role inthe world economic arena. Islamicbanking andfinancialinstitutionscontinueto experiencea significantgrowth. According to theannual report ofthe Islamic DevelopmentBank(IDB) in 2009, the Islamic financial institution was expected to grow more than 15% per year, with a number of Islamic financial institution is more than 300 spread over 75 countries with an estimatedtotalassets of500billiondollars, oraroundRp4,600trillion. In other words, themarkethas nowreachedonly about10%. From this IDB report, we can conclude thatthe industry is stillpromisinga remarkable developmentinthe future. Credence toIslamic banksafterthe economiccrisis of1997,The Indonesian government has established the LawNo.10 of 1998about banking. It is explicitly stated in the actthatIndonesia has adoptedthe dualbanking M. Nur Rianto Al Arif,Lecturer, Islamic Economics Department, SyarifHidayatullah State Islamic University. Email:agif08@gmail.com.