Al-Iqtishad: Jurnal Ilmu Ekonomi Syariah (Journal of Islamic Economics)
Volume 11 (1), January 2019
P-ISSN: 2087-135X; E-ISSN: 2407-8654
Page 117 - 134

1, 2 Syarif Hidayatullah State Islamic University Jakarta
E-mail: 1nurhidayah@uinjkt.ac.id, 2tabrani.co.id@gmail.com

Non-Performing Finance in Sharia Financial Institutions 
in Indonesia: A Case Study of BPRS Adeco (Aceh 

Development Corporation)

Nur Hidayah1, Tabrani2

Abstract. High level of Non-Performing	 Finance	 (NPF)	 has	 become	 one	 of	
the	risks	faced	by	intermediary	financial	institutions,	including	Islamic banks. 
Indonesia’s Financial Authority found that NPF ratio of Islamic banks is 
relatively	 higher	 (4,12%)	 that	 one	 of	 the	 conventional	 banks	 (OJK,	 2017).	
Literature	indicates	the	influence	of	the	bank’s	internal	and	external	factors	on	
high NPF.	This	study	aims	to	analyze	the	factors	that	influence	the	high	level	
of NPF and its settlement and strategies to reduce the level of NPF in Sharia 
Rural	Banking	(BPRS/Bank	Perkreditan	Rakyat	Syariah).	Taking	BPRS	Adeco	
(Aceh	Development	Corporate)	located	in	Langsa	City	District,	Aceh,	as	a	case	
study,	this	research	takes	a	qualitative	approach.	Through	a	survey	to	26	BPRS	
Adeco employees and semi-structured interviews with four employees, this study 
found three factors leading to an increase in the NPF ratio, namely weak bank’s 
financing	 risk	 management,	 changing	 economic	 conditions	 and	 regulations,	
and the conditions of customers who are vulnerable to socio-economic change. 

Keywords: Islamic Rural Banking, Non-Performing Finance, Finance Risk 
Management

Abstrak. Tingkat Non-Performing	Finance	(NPF)	yang	tinggi	telah	menjadi	
salah satu risiko yang dihadapi oleh lembaga keuangan perantara, termasuk 
bank syariah. Otoritas Keuangan Indonesia menemukan bahwa rasio NPF 
bank	 syariah	 relatif	 lebih	 tinggi	 (4,12%)	 dibandingkan	 bank	 konvensional	
(OJK,	 2017).	 Studi	 terdahulu	 menunjukkan	 pengaruh	 faktor	 internal	
dan eksternal bank terhadap NPF tinggi. Penelitian ini bertujuan untuk 
menganalisis faktor-faktor yang mempengaruhi tingginya level NPF dan 
solusinya, serta strategi untuk mengurangi tingkat NPF di Bank Perkreditan 
Rakyat	Syariah	(BPRS	/	Bank	Kredensial	Syariah).	Penelitian	ini	menjadikan	
BPRS	 Adeco	 (Perusahaan	 Pembangunan	 Aceh)	 yang	 berlokasi	 di	 Kabupaten	
Kota	 Langsa,	 Aceh	 sebagai	 kasus,	 dengan	 menggunakan	 kualitatif.	 Melalui	
survei	 terhadap	 26	 BPRS	 Karyawan	 Adeco	 dan	 wawancara	 semi-terstruktur	
dengan empat karyawan, penelitian ini menemukan tiga faktor yang 
menyebabkan peningkatan rasio NPF, yaitu lemahnya manajemen resiko bank, 
perubahan kondisi dan regulasi ekonomi, dan kondisi konsumen yang rentan 
terhadap perubahan sosial ekonomi.

Kata kunci: BPRS, Non-Performing Finance, Manajemen Risiko Keuangan



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Vol. 11 (1), January 2019

Introduction

Since the late period of New Order regime in the 1990s, Indonesia’s banking 
industry has entered a new stage of development by the establishment of Bank 
Muamalah Indonesia, a commercial bank based on sharia values by avoiding riba 
(interest), gharār (uncertainty), and maysīr (gambling). Based on Law of the Republic 
of Indonesia Number 21 of 2008 on   bank,   banks are defined as banks that carry 
out their business activities based on Sharia principles.   banks consist of Sharia 
Commercial Banks, Sharia Business Units (UUS/Unit Usaha Sharia) and Sharia 
Rural Banks (BPR/Bank Perkreditan Rakyat). Sharia Bank is a financial institution 
that carries out its activities in accordance with the provisions of the Quran and 
Hadith so that people who adhere to Sharia values persuasively prefer   Banking 
to fulfill their daily needs, both consumptive and productive needs. Some Muslim 
economic scholars argue that the more developed the Sharia Banking industry in 
a country, the better the country’s economic growth because it can help people to 
meet their needs and release the community from the interest system applied by 
conventional banks.

As financial institutions, banks function to collect and channel funds to the 
public in order to improve equity, economic growth and national stability towards 
increasing the welfare of the people. Banking is a vehicle that is able to collect and 
channel public funds effectively and efficiently towards improving people’s living 
standards. The funds are in the form of consumptive financing and productive 
financing. In everyday life, people have needs that must be fulfilled, which include 
primary, secondary and tertiary needs. 

There are times when the people do not have enough funds to fulfill all of 
their life needs so that they borrow from fellow citizens and financial institutions 
such as conventional banks and   banks. In the process of financing distribution to 
be able to meet the needs of the community, financial institutions such as   banks 
and conventional banks carry a high risk of credit or financing risk. Data from 
Financial Services Authority (Otoritas Jasa Keuangan/OJK) shows that the NPF of 
national   banking is 4.12%, relatively higher than the NPF of conventional banks 
at 2.96% (Uly, 2017). This shows that the credit risk management of conventional 
banks is better than the financing risk management of   banks.

In Langsa City, Nanggroe Aceh Darussalam, several banks run their activities 
in accordance with Sharia principles. One of which is the BPRS ADECO (Aceh 
Development Corporation) with the total assets of IDR 46, 420,337,000. In 
helping the community to be able to meet their needs, the BPRS ADECO offers 
sharia-based products, including murabahah and Muḍārabah	products. 



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According to Ascarya (2013), Murabahah is the sale and purchase of goods at 
the original price with the agreed-upon profit. In the murabahah contract, the seller 
must notify the cost of the goods he/she buys and determines an additional level of 
profit. In the process of payment, customers can pay in cash or debt (installments). 
Whereas Muḍārabah	is a contract of cooperation between two parties in which the 
first party (mālik, ṣaḥīb	 al-māl, LKS) provides all capital, while the second party 
(‘amīl, mudhārib, customers) acts as the manager. In this case, business profits are 
divided among them according to the agreement set forth in the contract (National 
Sharia Council, 2000).

In its operation, financing distribution is the main activity of BPRS ADECO, 
which contains risks that can affect the health of the bank. One of which is the 
increase in non-performing financing (problematic financing). In channeling funds 
to customers based on sharia, each bank must have rules and stages before providing 
financing. The rules are applied by the bank to avoid risks that might occur later; 
one of which is the risk of default. Therefore, it is important for the banks to assess 
5Cs to get customers who are truly eligible to be given financing. The 5Cs include 
character (capital/character), capital, capacity (ability), collateral (guarantee) and 
condition (Lailiyah, 2014).

Even though the BPRS ADECO has assessed 5Cs before financing, there are 
still customers who fail to fulfill their obligations to the bank. This is not in line with 
the expectations of BPRS ADECO. BPRS ADECO hopes that the 5Ca assessment 
prior to the provision of financing will be able to minimize the risk of financing, 
but it is not.

BPRS ADECO’s Financing Chart and NPF Ratio

Data Source: Financial services authority

From the graph above, it can be seen that in June 2012 the total amount 
of financing reached the lowest level at IDR 3.063.000 3862 but its NPF ratio 



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Al-Iqtishad: Jurnal Ilmu Ekonomi Syariah (Journal	of	Islamic	Economics) 
Vol. 11 (1), January 2019

reached the highest level of 15.62%. This is above the average national NPF ratio 
of whole BPRSs at 6.39% (Indonesia Bank, 2012), as well as above the maximum 
value of NPF set by the Bank of Indonesia at 7 %, stated in the Attachment of the 
Bank of Indonesia Circular Letter No. 9/29 /DPbS, 7 December 2007. However, 
in December 2018, with the amount of financing reaching the highest number of 
IDR 29,786,770,000, its NPF ratio was only 3.60%. This is far below the average 
national NPF ratio of the whole BPRSs at 9.30% (Financial Services Authority, 
2018), and also below the maximum value set by Bank Indonesia at 7%. 

At the moment, when the total financing is at the lowest level, the NPF 
ratio of BPRS ADECO is at the highest level. Meanwhile, when the total financing 
is at the highest level, the NPF ratio is quite low, which is below 7%. This means 
that BPRS ADECO has well responded to the alarming high NPF in 2012 and 
restructured its financing risk management. This step has successfully lowered its 
NPF ratio gradually and improved its financing risk management. Yet, this raises 
some questions of how BRPS ADECO has handled the problem of high NPF; 
and what strategies has been implemented to settle the issues of non-performing 
financing and lower its high NPF ratio as well as strengthen its financing risk 
management.   

Literature Review 

High ratio of NPF and a big number of delinquent financing customers has 
become a common problem for financial institutions. According to Hidayatullah 
(2014), financing, which is part of the important role of banks in channeling funds to 
the public or companies, is carried out through a process of analyzing the feasibility 
of financing to the realization of disbursement of funds. Realization of financing is 
not the last stage of the financing process. After the realization of financing,   bank 
officials need to monitor and supervise the utilization of such fund of financing. The 
involvement of   bank officers in monitoring and supervising financing is a necessity, 
in order to save public funds that have been trusted to be managed by   banks.

Although sharia commercial banks and sharia business units have 
implemented various strategies to avoid financing problem, in practice,   banking 
still faces problematic financing. The research conducted by Hidayatullah aims to 
find out factors causing problematic financing, and strategies to tackle and settle 
them. The findings indicate that the causes of problematic financing are related to 
internal and external factors of the bank, business failure factors and management 
incapacity factors. The rescue efforts carried out by banks are financing rescheduling, 
reconditioning (return requirements), and restructuring.



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Investigating high NPF of micro-credits of Bank Jatim, Mojokerto Branch 
from 2012-2013 and its strategies to lower the NPF, Savitri et al. (2014) found that 
the Bank of East Java Mojokerto Branch used to have poor credit risk management. 
So, its non- performing loans increased during those periods. To overcome this, 
the bank of East Java, Mojokerto Branch implements several strategies that include 
actively supervising the board of commissioners and directors; setting tight credit 
policies and procedures, building good information systems; strengthening credit 
risk management, and controlling credit risks.

Studying BMT (microfinance) Sidogiri, Hasanah, et al. (2015) found that 
BMT Sidogiri has faced risks arising from its financing. This occurred because some 
customers found difficulties in paying the installments of their financing funds 
from the BMT.  To respond to this problem, BMT Sidogiri has established risk 
management system to minimize the risks by implementing some strategies tailored 
to the specific nature of the risks. 

Research conducted by Azharsyah and Arinal (2017) indicates that the factors 
causing troubles in murabahah financing come from 1) customers, 2) internal banks 
and 3) fictitious factors. The implemented policies are very comprehensive, from 
prevention to completion. The technical settlement is carried out by the on-spot 
method, subpoena, billing, restructuring, sale of collateral, and write-off as well as 
stipulation of fines

Turmudi (2016) states that the management of the settlement of troubled 
financing can be done by: first, implementing risk control standards, and preventing 
the risk through the analysis of the character and capacity of the customers; and 
Second, by rescheduling, reconditioning, restructuring, settlement through 
collateral, and write off.

Based on the above literature review, no one has examined the strategies carried 
out by   banking in order to reduce the NPF ratio. As is happened in the BPRS 
ADECO, wherein June 2012, the NPF ratio reached 15.62%, which was ranked at 4. 
With 13% <NPF ≤ 16%, the bank’s financial performance was categorized ‘not good’. 
Whereas in the December 2018, the NPF ratio level was 3.60%, which was ranked 
as 1. With NPF ≤ 7%, the bank financial performance is categorized “very good”. 
Therefore, the paper intends to fill out the gap in the literature so that the results 
of this study can be used as a reference by banks in Indonesia, especially   banks, tp 
reduce the high NPF ratio. This research aims to determine what factors lead to the 
increase of NPF ratio in June 2012, what policies applied by the BPRS ADECO to 
overcome financing problems, as well as what strategies undertook by BPRS ADECO 
to reduce the ratio of NPF. This research is expected to be a framework or model for 
other   banks in facing problematic financing. 



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Method

The method used in this research is qualitative study with a case study 
approach, using both primary and secondary data. The primary data (main source) 
is collected from the survey to all BPRS ADECO employees and interviews with 
the director and account/financing officer of BPRS ADECO. Whereas. secondary 
data was collected from relevant materials in the form of books, journals, and others.

The data was collected in July-August 2017 and revisited in December 2018. 
The survey was carried out to all 26 (twenty-six) employees of BPRS ADECO 
from 10 July-August 2017. The interviews were conducted to the director and 3 
(three) account officers from the financing department in July 2017 and updated in 
December 2018. 

Data of Respondents

Table 1. work position of the respondents

Position Frequency Percentage

Head of section financing 1 3.8

Account Officer 6 23

Financing administration 2 7.8

Remedial 1 3.8

Internal audit 1 3.8

Head of section operations 1 3.8

Head of the section cash office 1 3.8

Costumer service 2 7.8

Teller 3 11.6

General administration and HRD 3 11.6

Security 3 11.6

Accounting 1 3.8

Office service 1 3.8

Total 26 100



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Table 2. Working experience of employees

Length of working experience Frequency Percentage

1-5 years 16 61.5

6-10 years 10 38.5

Total 26 100

Result and Discussion

Causes of non-performing financing

BPRS ADECO is one of the   banks in Langsa City, which its operation is 
based on sharia principle. In carrying out its activities as a sharia financial institution 
that collects and disburses funds to the public, BPRS ADECO offers several sharia-
based financing products, including murabahah and Muḍārabah	products. However, 
the murabahah products have been dominant among other financing schemes in 
BPRS ADECO.

Being the most favorable products, the murabahah products with installment 
payment system become the main activity of BPRS ADECO. However, such 
products expose the bank to a very high risk that can affect the health of the bank. 
One of which is the increase in the ratio of Non-Performing Financing (NPF). 
The risk of increasing NPF ratio is an issue that cannot be avoided by the BPRS 
ADECO. To mitigate such risk, BPRS ADECO conducts a 5Cs assessment for 
every potential customer.

Despite such a strategy, in the period of June 2012, its NPF ratio increased 
quite high, reaching 15.62%. This is above the maximum value set by the Bank of 
Indonesia, which is 7%. The survey indicated that the factors that influenced the 
increase in the NPF ratio in the June 2012 period are as follows:

Table 3. Factors leading to non-performing financing

Factors Frequency Percentage

Changing economic conditions and regulations 26 100

Weak bank financing management 20 96

Conditions of customers who are vulnerable to change 24 92



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Vol. 11 (1), January 2019

1. Changing economic conditions and regulations

The most contributing factors to the BPRS ADECO’s financing problems 
during June 2012 were the changing of economic conditions and regulation. In 
this case in the development of Langsa Town Square. In 2012, Surez Kumar, the 
managing director of PT   Son Langsa Mandiri, a local company, decided to build 
a shopping center named Langsa Town Square (LATOS) in Langsa City. LATOS 
development in Langsa City aimed to improve the economy of the people of 
Langsa City. However, before these goals can be realized, there were those who felt 
disadvantaged by the construction of LATOS in Langsa City. These include the 
informal side-street traders who lost their place because of the LATOS construction. 

As these informal side-streets traders are the customers of BPRS ADECO, it 
was also affected. BPRS ADECO suffered losses in June 2012. The NPF ratio reached 
15.62% because 70% of its customers were traders in the Langsa City market. It 
can be concluded that changing in socio-economic conditions of customers have 
negatively influenced the financing performance of BPRS ADECO. This confirms 
previous research conducted by Hidayatullah (2014) on   banks, revealing that one 
of the causes of problematic financing is a distressing economic situation.

Initially, the traders can fulfill their obligations to BPRS ADECO without 
any obstacles. However, after they were removed and could not open their booths 
in the Langsa City market, and they could not fulfill their obligations to BPRS 
ADECO. In this case, the BPRS ADECO was disadvantaged by the construction of 
LATOS by not getting the instalment repayment from the traders. 

2. Lack of good financing risk management

The second factor that contributes to the financing problems during June 
2012 is the lack of good financing risk management. This includes the lack of 
diversification of funds, poor management of financial portfolios, incomplete SOP, 
and weak 5Cs analysis.

a. Lack of Diversified Segments of Funds

The survey revealed that one contributing factor of BPRS ADECO’s high 
NPF ratio is the lack of diversified funds as its market segment of financing was too 
focused on one particular segment of SMEs (Small Medium Enterprises). BPRS 
ADECO prioritized the financing the traders at the Langsa City market to improve 
their standard of living. However, this has a negative impact on the bank, which 
is the increase in problematic financing in June 2012. So, when the segment was 
experiencing problems, BPRS ADECO did not get the return from these customers. 



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This finding confirms previous research conducted by Hidayatullah (2014) on   
banks, finding that one of the causes of problematic financing is excessive investment 
in one sector.

b. Incomplete SOP (Standard Operating Procedure)

Standard Operating Procedure (SOP) is a guideline or a reference in carrying 
out tasks in accordance with the policies set by an institution. In carrying out 
their duties, employees at the BPRS ADECO use SOP as their guideline in daily 
activities, so that the objectives of the BPRS ADECO can be realized. In the period 
of June 2012, ADECO BPRS did not have a flowchart, namely the scheme of the 
stages in approving financing. Due to the absence of the flowchart, the Accounting 
Officer did not have complete guidelines on financing. Therefore, in the period of 
June 2012, the amount of financing was problematic, and the NPF ratio increased. 
The results of this study confirm previous research conducted by Astuti (2015) at 
BMT XYZ, finding that one of the causes of problematic financing is the absence of 
policies on good financing. 

c. Weak 5Cs Analysis

The increase in the NPF ratio in June 2012 was due to the weak human 
resources that are able to conduct strong 5Cs analysis and assessment towards 
potential character, capital, capacity, collateral and conditions before providing 
financial assistance to them. Such weak 5Cs analysis is reflected in: (1) lacking of 
background checking of prospective customers, (2) being too aggressive or rushed 
to disburse the financing funds, (3) being excessive of confidence in the solvency 
of potential customers, and (4) lacking of experience among the account officers in 
conducting 5Cs analysis.

The results of this study confirm previous research conducted by Astuti 
(2015) at BMT XYZ, finding that one of the causes of problematic financing is 
the incapability of the officers to conduct financing analysis professionally, mainly 
due to the low knowledge and experience of account officers in carrying out these 
tasks.

3. Conditions of customers who are vulnerable to change

The development of LATOS, besides having a bad impact on BPRS ADECO, 
also has had an impact on the market traders of Langsa City, who were also the 
customers of the BPRS ADECO. Many of the traders were unable to adjust with the 
LATOS development. However, some of them were able to deal with the situation, 



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Vol. 11 (1), January 2019

so that the construction of LATOS did not have such a big impact on some of 
them. The development of LATOS has had a major impact on traders who lack 
experience in running businesses, have weak psychological resilience for changes in 
micro—and macro—economic conditions, and come from low economic status. 
The construction of LATOS in Langsa requires the traders in the Langsa City 
market to be more effective and have high competitiveness to be able to survive 
with the existing situation. However, many of the traders did not have such high 
competitiveness, resulting in their difficulties to pay the installments.

Policies to Settle Non-Performing Financing 

To uncover these conditions, the BPRS ADECO immediately took a stand 
by making policies to settle the problematic financing. The bank must manage the 
problematic financing so that the problematic financing is at a reasonable level and 
does not cause losses to the bank any longer. This is because the biggest contribution in 
bank income comes from financing disbursement (Savitri, et al., 2014). A policy made 
by the BPRS ADECO is to improve communication and guidance to customers; this 
is done in the following ways:

1. Rescheduling

BPRS ADECO gives away leniency or extension of the installment period 
to the customers in accordance with the customer’s ability. This extension is not 
followed by the rise in profit margins as long as the customers do not have any 
attention to pay the installments. The extension provided by BPRS ADECO is 
adjusted to the customers’ ability based on their monthly incomes. This is because 
the customers’ income has decreased and made them unable to pay the instalment. 
Therefore, BPRS ADECO adjusts the period extension with the customers’ income 
each month to ease the burden on the troubled customers. 

The results of this study are supported by the research conducted by Shobirin 
(2016). It says that if the financing can still be expected to run well again, then 
the BMT can provide relief-relief such as delaying the installment schedule 
(rescheduling). However, if the congestion is due to negligence, violation or fraud 
from the customer, the BMT can request that the customer to immediately settle 
their obligation, including delivering the goods pledged to the BMT. If an out-of-
court settlement cannot be fulfilled, the BMT can take a legal action. In this case, 
two legal institutions can be considered, namely the district court or arbitration 
body. 



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2. Reconditioning

BPRS ADECO removes some parts or all of the bank’s profit margin and 
extends the installment period to ease the burden of the customers in paying the 
installments. In the elimination of margins, the bank provides two options for 
troubled customers, which are to pay all their debt in cash by selling their own 
collateral or in instalments again.

The results of this study are supported by research conducted by Ibrahim & 
Rahmati (2017). If financing can still be expected to run well again, then from the 
bank will provide relief-relief such as the requirement back (reconditioning); the 
changes in some or all of the financing requirements including changes in payment 
schedules; the number of installments (could be as low as possible by considering the 
customers’ economic condition); the time period; and the payment of installments.

3. Restructuring

Restructuring is the addition of financing to re-run the customers’ business. 
In carrying out a business, it is not always the customers’ business that develops and 
advances. Sometimes the customers’ business experiences a setback which can result 
in a decrease in their income and failure to fulfill their obligation to BPRS ADECO. 
The setback is caused by the lack of capital to run the business. 

To anticipate the setbacks, BPRS ADECO injects or adds capital to the 
customers to be able to run their business optimally. So, the customers can increase 
the profits and the BPRS ADECO obtains the return from the customers.

The same thing was found by Azhari (2012), stating that the cause of a setback 
in the costumers’ business is the lack of capital. In this case,   financial institutions could 
provide a loan, perhaps in the form of al-qardhul hasan, murabahah or Muḍārabah	
financing. These can help the customers’ business to progress and avoid setbacks. 

Strategy in reducing NPF ratio

To reduce the high NPF ratio that occurred in June 2012, the BPRS ADECO 
made strategies to be able to reduce the high NPF ratio. The strategies made are as 
follows:

1. Improvement banking finance management

In perfecting financing management in the BPRS ADECO, the bank did 
so by improving SOPs, increasing 5Cs analysis, varied market segmentation, and 
intensive billing.



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a. SOP improvements

The first strategy is the improvement of the SOP concerning financing. BPRS 
ADECO improves the SOP by creating a complete flowchart related to the stages 
before providing financing to prospective customers. The complete and regular 
flowchart will make employees of BPRS SRO AO have clear guidelines that can be 
used as a guide before providing financing to prospective customers. A complete 
SOP will support the bank’s operational performance to be better and directed so 
that the vision and mission of the BPRS ADECO can be achieved.

b. Improved 5Cs Analysis

To be able to reduce the high NPF ratio that occurred in June 2012, the 
AO of Financing in the BPRS ADECO carried out a deeper 5C assessment to get 
prospective financing customers who were truly eligible for financing. The methods 
carried out by the AO of Financing in the BPRS ADECO are as follows:
1) Personal interview
 The first thing that is done by the AO is to obtain financing customers that 

are truly feasible to be given financing by interviewing the customer clients. 
In this personal interview, the AO asked the prospective customers regarding 
the amount of financing they want, the purpose of financing, their profession, 
their earning per month, whether they have ever financed by other banks, 
their business condition, their guarantee, whether the guarantee is in their 
possession, and the condition of the guarantee. This is done by AO to assess 
character, capital, capacity (ability), and collateral (collateral) of prospective 
financing customers.



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2) Information or network
 The bank prioritizes prospective customers who are brought or recommended 

by existing customers, who have applied for financing in the BPRS ADECO 
with a smooth category. In this way, employees of ADECO SRO AO will 
obtain correct and accurate information about prospective customers related to 
character, capital, and capacity (ability) from old customers who recommend 
these new prospective customers. So, an ADECO BPRS AO employee, besides 
interviewing the new prospective customer, can also interview the old customer 
to get confidence that the prospective customer is eligible for financing.

3) Bank to bank information
 An AEC BPRS AO employee also conducts a Debtor Information System (SID) 

study related to prospective financing customers. The information is related to 
find out whether the customers have a loan at another bank, and to find out the 
customers’ reputation in paying the installments to the bank. In conducting the 
research SID, employees of AO BPRS ADECO communicate with the other 
banks to look for information related to their capacity (ability) to meet their 
obligation to bank. 

4) Not accepting prospective customers from one agency if there are three 
problematic clients in the agency

 Installment payment system for customers originating from an agency, namely 
salary deductions through the agency’s treasurer. If in one agency there are 
three troubled customers, the BPRS ADECO will not accept new prospective 
customers from the agency. This is because the treasurer of the agency does not 
carry out its duties in accordance with the agreement in advance with the BPRS 
ADECO.

5) Location survey and survey of business premises
 To obtain financing in the BPRS ADECO, prospective financing customers 

must complete the requirements stipulated by the BPRS ADECO. After BPRS 
ADECO receives the requirements, the AO of Financing in the BPRS ADECO 
will survey the location of the residence of the prospective financing customers. 
The purpose of the location survey is to get information about the conditions 
of residence of prospective customers and obtain information about collateral 
or collateral belonging to the customer.

In addition to this, the AO Funding employee at the BPRS ADECO also visits 
the prospective customer’s business premises. This is done to assess the extent of the 
ability of the prospective customer in running the business. Also, AO employees also 
assess the self-financing that the prospective customer has in running his business.



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c. Variable market segmentation

Funding risk cannot be eliminated by the BPRS ADECO, but the BPRS 
ADECO can minimize this risk through varied market segmentation. One of them 
is the market segmentation of BPRS ADECO in channeling funds to the public, 
namely civil servants (PNS). This is because civil servants have a fixed certainty and 
salary each month. Thus, the possibility of a financing risk will decrease because if 
the customers from civil servants, then, they must represent their salary withdrawal 
to the bank.

d. Intensive billing

Daily quotes are made to make it easier for customers to pay their installments 
to the BPRS ADECO. A daily installment payment system will make the burden 
and responsibility of customers feel lighter and smaller. By reducing the number of 
installments, the percentage of BPRS ADECOs to get back their receivables from 
customers will be greater. Thus, the strategy made by the BPRS ADECO to reduce 
the high NPF ratio that occurred in the June 2012 period will be successful.

2. Strengthening human resources in risk management and change

The quality improvement of human resources is carried out by conducting 
internal training on banking products, sharia banking risk management, and 
constraints and opportunities for   banking. The training conducted by the BPRS 
ADECO aims to improve quality, so that by increasing the quality of HR, the profit 
will also increase.

In addition, the BPRS ADECO also included or sent several employees to 
participate in training made by Bank Indonesia (BI), the Financial Services Authority 
(OJK), the Indonesian Credit Bank Association (PERBARINDO), and the   Bank 
Association Indonesia (ASBISINDO). The materials discussed in training included 
the following:
a. Bank Indonesia: Settlement of Problem Customers
b. OJK: Customer Complaint Settlement Service
c. PERBARINDO: Work Ethics
d. ASBISINDO: Products that are Relevant to Age Development

3. Management of assistance to customers

Management consulting assistance is assistance and professional 
management offered by banks to customers in the management and business 



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development. The bank provides consultation and guidance to motivate customers 
to be more enthusiastic and never give up in running their business. This was 
done by the BPRS ADECO because 70% of its customers were MSME (Micro, 
Small and Medium Enterprises); customers whose majority did not understand 
management. Therefore, the bank provides consultation and guidance on the issue, 
so that it has a good impact on the customer and also for the bank. which is to 
get back the receivables and reduce the high NPF ratio. Management of assistance 
provided by BPRS ADECO to customers includes providing consultation related 
to customers’ business prospects, risks that might be faced by customers in 
carrying out their business, strategies in minimizing risks, and mental readiness 
to face changes.

From the researchers’ point of view, the policies made by the BPRS ADECO 
have been very good and are in accordance with Sharia provisions. When the 
problematic customer is experiencing a setback in his business, the bank does not 
suppress and does not add to the burden on the troubled customer, but provides 
relief to the troubled customer according to his ability at that time. In this case, the 
policy made by BPRS ADECO is in accordance with the commands of Allah SWT 
in the Quran Surah Al Baqarah.

The Word of Allah SWT in al Quran sura al Baqarah verse 280:

ۈئ ۈئ   ۆئۆئ    ۇئ   ۇئ   وئ   ەئوئ   ەئ  ائ   ائ     ى   ى           ې  
  ېئ

“And if (the person who owes it) is in trouble, then give a period until he 
has gained spaciousness. And if you give up, it is better for you if you know. 
(Surat al-Baqarah: 282).”

The paragraph above explains the provision of long-term concessions to 
debtors who are in trouble. If there are people who are indebted but have not been 
able to repay their debts because they are experiencing difficulties in their economy, 
Allah SWT instructs His servants to be patient and extend the period until he is able 
to pay it. And also Allah SWT advised His servants to give away their debt, this was 
to ease the burden of those who owed it.

In completing the problematic financing in June 2012, BPRS ADECO of 
Langsa City also practiced what was ordered by the messenger of Allah along that 
Allah SWT would help his servant in the hereafter later if the servant likes to help 
others during his lifetime.



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Prophet Muhammad’s hadith narrated by Muslims: 

َج اهلُل َعنُْه ُمْسِلٍم ُكْرَبًة ْنيَا، فَرَّ َج َعْن ُمْسِلٍم ُكْرَبًة ِمْن ُكَرِب ادلُّ  َمْن فَرَّ
ِخيِْه

َ
َعبُْد ِفْ َعْوِن أ

ْ
َعبِْد َماَداَم ال

ْ
ِقيَاَمِة، َواهلُل ِفْ َعْوِن ال

ْ
 ِمْن ُكَرِب يَْوِم ال

)رواه مسلم(.
“The person who releases a Muslim from his troubles in the world, Allah will 
release his troubles on the Day of Judgment, and Allah will always help His 
servants as long as he (likes) helps his brother. (Narrated by Muslim).”

The Prophet suggested to his people to help one another in the goodness of 
their fellow Muslims during their life in this world, moreover helping their brothers 
who were in trouble or being hit by calamities. The Prophet asserted that anyone 
who likes to help a Muslim who is struck by a disaster, then the reward is Allah SWT 
will help these muslims on the Day of Judgment.

Conclusion

One of the risks facing   financial institutions is when the customers find 
it difficult to repay their financing installments. Using BPRS ADECO as a case 
study, this paper has analyzed the factors influencing the high level of NPF, its 
settlement and strategies to lower such NPF in Sharia Rural Banking, which used 
to experience high NPF ratio in June 2012. It finds three factors leading to such 
high NPF: firstly, changing economic conditions and regulations; secondly, poor 
risk financing management such as lack of financing segment diversification, weak 
financing portfolio management, incomplete SOP, and weak analysis of 5Cs; thirdly, 
customer conditions that are vulnerable to change.

The policy carried out by BPRS ADECO in resolving problematic financing 
is intensifying communication to its delinquent customers. These include persuasive 
communication, rescheduling, reconditioning, and restructuring.

The strategies made by the BEC ADECO to reduce problem financing 
in the period of June 2012 included the improvement of bank financing 
management, the improvement of the quality of human resources in risk 
management and change, and the improvement of assistance management to 
customers.



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