Accounting Analysis Journal 9(1) (2020) 38-45 Accounting Analysis Journal https://journal.unnes.ac.id/sju/index.php/aaj p-ISSN 2252-6765 e-ISSN 2502-6216 Factors Affecting Non-Performing Financing at Islamic Commercial Banks in Indonesia Ayu Retnowati* 1 and Prabowo Yudo Jayanto 2 1,2 Accounting Department, Faculty of Economics, Universitas Negeri Semarang ARTICLE INFO ABSTRACT Article History: Received January 18 th , 2018 Accepted March 3 th , 2020 Available March 30 th , 2020 This study aims to determine the effect of Inflation, Gross Domestic Product (GDP), Operational Income Operating Cost (BOPO), Financing to Deposit Ratio (FDR) and Capital Adequacy Ratio (CAR) to Non Performing Financing (NPF). The population in this study were 13 Islamic Commercial Bank in Indonesia in year 2012-2015. The sample selection used purposive sampling technique which resulted in 9 banks and the analysis units were 36. Data collection method used in this research was documenta- tion. Data analysis method used was Structural Equation Modeling (SEM) with Partial Least Square (PLS) with SmartPLS 3.0 analysis tool. The results show that the infla- tion, GDP, and FDR variables do not significantly influence NPF. BOPO variable has a positive and significant influence to NPF. CAR variable has a negative and significant influence to NPF. The conclusion shows that the inflation, GDP, and FDR variables do not significantly influence NPF. Variables of BOPO and CAR have significant influence to NPF. Keywords: capital adequacy ratio; financing to deposit ratio; gross domestic product; inflation; non performing financing; operational income operating cost INTRODUCTION Financing is a form of distribution of funds pro- vided by Islamic banks to the public who need funds. Asrori (2014) stated Islamic banks are Islamic financial institutions, which were founded based on belief in Is- lamic teachings and adherence to Islamic principles. In financing at Islamic commercial banks, there is a risk of financing, namely non-performing financing. Non Per- forming Financing is a non-performing financing indi- cator that needs to be considered because it is fluctuating and uncertain, so it is important to observe with special attention. NPF is one of the performance assessment instruments of an Islamic bank which is an interpreta- tion of the assessment of productive assets, especially in the assessment of non-performing financing (Popita, 2013). Non Performing Financing shows the ability of bank management to manage non-performing financing provided by banks. The higher this ratio, the worse the quality of bank loans which causes increased problem loans (Yulianto & Solikhah, 2016). Non-performing Fi- nancing (NPF) financing consists of Substandard (KL), Loss (M) and Doubtful (D) financing. High financing growth is also accompanied by deteriorating financing quality, which can be seen from the higher NPF in Islamic banks than NPLs in conven- tional banks. Quoted from the okezone.com news page (2017) that the Financial Services Authority (OJK) sta- tes if the financing ratio is the ratio of Non Performing Finance / NPF) from Islamic banks is still relative higher compared to conventional banks’ Non-Performance Lo- ans (NPLs). Noted, from the fourth quarter of 2016 to October 2017 the NPF value of Islamic banks was at 4.12%. This figure far exceeds the conventional bank NPL of 2.96%. This can be seen in the following table: Table1. Comparison of NPF in Islamic Commercial Banks and Conventional Bank Years Islamic Bank NPF (%) Conventional Bank NPL (%) 2012 2.22 1.87 2013 2.62 1.80 2014 4.95 2.04 2015 4.84 2.39 2016 4.12 2.96 2017 (Oct) 4.12 2.96 Source : OJK www.ojk.go.id), 2017 * E-mail: aretnowati33@gmail.com Address: L2 Building 2nd floor, Campus Sekaran, Gunungpati, Semarang, Indonesia, 50229 DOI 10.15294/aaj.v9i1.20778 © 2020 Published by UNNES. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/)