“The effect of the COVID-19 pandemic on profitability performance and maqashid sharia performance in Islamic commercial banks in the ASEAN region”

The outbreak of COVID-19 in early 2020 has caused a crisis in various sectors, including the economic sector. In fact, its impact on the performance of Islamic banks in the ASEAN region is currently still unknown. Therefore, this study aims to obtain empirical evidence regarding the effect of COVID-19 on profitability performance and maqashid sharia performance in Islamic banks in the ASEAN region. Profitability performance is measured by return on equity (ROE) and return on assets (ROA). The number of observations from this study was 202 with a sample of 30 Islamic commercial banks in the ASEAN region in 2015–2021. The data analysis technique used is EViews 12. The results show that COVID-19 has no significant effect on profitability performance in Islamic banks, whether measured by ROE or ROA. On the other hand, COVID-19 has a significant effect on reducing the maqashid sharia performance. In addition, company size has been proven to positively affect profitability performance and maqashid sharia performance in Islamic banks before and after the COVID-19 pandemic. Operating expense ratio (OER) has been proven to affect ROE and ROA, whereas FDR and non-performing financing (NPF) have been proven to only affect ROA. OER influences promoting welfare, while FDR and NPF influence establishing justice. The study results confirm the ability of Islamic banks to generate profits amidst the COVID-19 pandemic. They also confirm the negative impact of the COVID-19 pandemic on three aspects of maqashid sharia performance.

The effect of the COVID- 19 The effect of the COVID-19 pandemic on profitability pandemic on profitability performance and maqashid performance and maqashid sharia performance in Islamic sharia performance in Islamic commercial banks commercial banks in the ASEAN region in the ASEAN region

INTRODUCTION
The COVID-19 pandemic is not only affecting health issues but is also causing disruptions to the global economy (Hasan et al., 2020).In the global banking sector, growth in conventional bank lending and Islamic bank lending has slowed.However, conventional banks have experienced a more significant decline (Boubakri et al., 2023).In countries more severely affected by the health crisis, the impact on bank lending is smaller.These effects also depend on the financial condition of banks (Ҫolak & Öztekin, 2021).The coronavirus disease is impacting the decline in stock price indices and economic growth (Haryanto, 2020;Saraswati, 2019).
The study objective is to obtain evidence on the impact of COVID-19 on the profitability and Maqasid Shariah performance in the ASEAN region.The study provides a deeper understanding of how the crisis is likely to impact the Islamic banking sector.Banking plays an important role in the economies of ASEAN countries, the most Muslim-majority region in the world (Rizaty, 2022).Moreover, Islamic banks in ASEAN countries have demonstrated good resilience in times of crisis (Luqmanulhakim et al., 2021).In Indonesia, Islamic banking has been running for more than 24 years since Law Number 10 of 1997 concerning Banking was first passed (Salman, 2021).Islamic banking assets in Indonesia experienced growth of 14.21% year on year (yoy) in July 2022 to IDR 721 trillion.The Islamic banking third party fund collection in the same period grew by 13.55% to IDR 572 trillion, greater than the national banking third party fund collection, which only grew 8.62% to IDR 7,898 trillion (Rahayu, 2022).Bank Islam Malaysia Berhad was the first Islamic bank established in 1983.As of 2019, the first Islamic bank Tabung Amanah Islam Brunei (TAIB) has been operating in Brunei Darussalam since September 1992, and since 2000, all banks in Brunei operate according to sharia principles (Ghozali et al., 2019).
The performance of Islamic banks in ASEAN is still good and above conventional banks in terms of increasing assets, third-party financing, and financing for the fiscal year ending July 2022 (Pambuko et al., 2018;Trad et al., 2017a).However, in the final stages of the crisis, Islamic banks experienced far greater financial instability than conventional banks (Alqahtani & Mayes, 2018).Based on maqasid sharia studies, Islamic scholars agree and recommend continuing economic growth during the pandemic (Ash-Shiddiqy & Fitriyati, 2022).It is hoped that all economic instruments based on Maqasid Sharia will be a sustainable solution to alleviate the impact of the economic crisis (Rusydiana et al., 2021).

LITERATURE REVIEW AND HYPOTHESES
Profitability is the performance achieved by banks in the aspect of profit generation.Factors that determine the rise and fall of Islamic bank profitability include bank size and capital (Trad et al., 2017b), sharia supervision, governance, and capital adequacy ratio (Tashkandi, 2022).Size and capital adequacy determined the profitability of Islamic banks and reduced risk in 13 countries in the MENA region in 2006-2013 (Trad et al., 2017a).Sharia supervision and governance are related to banks' profitability (Tashkandi, 2022).Apart from that, Islamic banks have proven to be less cost-effective.However, Islamic banks have better asset quality and capital, as well as higher intermediation ratios (Beck et al., 2013).
Maqashid sharia is the target of law in order to produce good benefits (al-mashlahah) and avoid harm (mudharat) (Jazil & Syahruddin, 2013).Benefits are divided into three levels: necessity, complement, and embellishment.Necessity is a vital element for human well-being.This basic element must be fulfilled; otherwise, this will destroy the continuity of social life.Complement is an element that makes human life more comfortable.Embellishment is an element associated with moral and ethical rules (Mohammed et al., 2015).According to Al-Shatibi, sharia is not only intended to maintain the good benefit but also spread (tabligh) the benefit for human life.These five elements are religion, life, mind, dignity, and wealth (Malik, 2015).Maqashid sharia is intended to contribute prosperity through the protection of religion, life, mind, dignity, and wealth (Jazil & Syahruddin, 2013).In line with this, the elements of maqashid sharia include wealth, prosperity, intellect, faith, and the human self (Esen, 2015).Specifically, maqashid sharia is divided into three objectives (Zahrah, 1994).Zahrah (1994) and Razak et al. (2008) formulate an evaluation for Islamic banks based on the concept of maqashid sharia (Razak et al., 2008).In most cases, Islamic banks fail to fulfill the maqasid of Sharia optimally (Antonio et al., 2020).
At the beginning of the crisis, empirical research was still focused on the effect of the pandemic on the performance in the capital market ( In a broader context, maqashid sharia during the COVID-19 pandemic is intended to protect lives through health protocols and maintaining distance in various sectors.A study related to the implementation of maqashid sharia in a social institution was carried out by Dahlan et al. (2021).
From the perspective of Islamic needs, in the context of the COVID-19 pandemic, the apposition of the principles of ḥifẓun nafs in mosques is considered a primary need (ḍarūriyyāt) because protecting life is the same as providing spiritual continuity in carrying out worship collectively.The performance of maqashid sharia includes aspects of education, justice, and welfare.This performance is expected to help Islamic banks achieve economic justice in society.This can all be achieved by reducing the gap in society within a framework that is in accordance with maqashid sharia.According to Pireh (2022), in order to ensure justice and prosperity during the COVID-19 pandemic, Islamic banks offer sharia-compliant stock trading, sharia-compliant crowdfunding platforms, and sharia microfinance financing in the form of Qardul Hasan.Apart from that, financing for industrial factories and low-margin Murabahah facilities is also provided to ensure justice and prosperity.
This study aims to test the effect of COVID-19 on profitability and maqashid sharia performance in the ASEAN region.This study formulates five hypotheses: The COVID-19 pandemic has an effect on ROE.
H 2 : The COVID-19 pandemic has an effect on ROA.
H 3 : The COVID-19 pandemic has an effect on the maqashid sharia performance in terms of educating individuals.
H 4 : The COVID-19 pandemic has an effect on the maqashid sharia performance in terms of establishing justice.
H 5 : The COVID-19 pandemic has an effect on the maqashid sharia performance in terms of promoting welfare.

RESULTS
This study's panel data are analyzed and tested using EViews 12.The Hausman test shows that the best model used is REM because the random cross-section probability value is 0.3698 (p > 0.05) (Table 3).The results show that the Breusch-Pagan p-value is 0.0017 (p < 0.05) (Table 4), so it rejects the null hypothesis and the best model is the random effect model.The results show that the COVID-19 pandemic has an effect on maqashid sharia performance (educating individuals) with a p-value of 0.0000 (p < 0.05).The testing of the control variables show that only Islamic bank size has an effect on the maqashid sharia performance in the aspect of educating individuals.Adjusted R 2 is 12.21% (Table 7).The results show that the COVID-19 pandemic has an effect on maqashid sharia performance (establishing justice) with a p-value of 0.0000 (p < 0.05).
The testing of the control variables shows that the Islamic bank size, FDR, and NPF have an effect on the maqashid sharia performance as measured by the aspect of establishing justice.Adjusted R 2 is 33.92%, meaning that the aspect of establishing justice is determined by all independent variables in the model at 33.92% (Table 8).The results show that the pandemic has affected the performance of maqashid sharia as measured by the aspect of promoting welfare with a p-value of 0.0496 (p < 0.05).The testing of the control variables shows that the Islamic bank size and OER have an effect on the performance of promoting welfare.Adjusted R 2 is 34.72%, meaning that the rise and fall of maqashid sharia performance as measured by aspect of promoting welfare is determined by all independent variables in the model at 33.06% (Table 9).Based on the results of the hypothesis test (Table 10) it shows that two hypotheses are rejected and three hypotheses are accepted.The rejected hypothesis is related to profitability performance, while the accepted hypothesis is related to maqashid sharia performance.These results indicate that the COVID-19 pandemic does not affect the profitability performance of Islamic banks in the ASEAN region.On the contrary, this study found a negative impact of the COVID-19 pandemic on maqashid sharia performance.

DISCUSSION
There is no empirical evidence that the COVID-19 pandemic, which lasted from March 2020 to June 2023, had an impact on the ROE and ROA of Islamic banks in the ASEAN region.
Islamic banks in the ASEAN region are still able to generate consistent profits even in pandemic conditions with financing products based on profit sharing, margin, and ujrah.This study supports Alnabulsi et al. ( 2022) that COVID-19 has no effect on the performance of banks.The results of this study also indicate that bank-specific and macroeconomic factors affect the NPF, while COVID-19 has no significant effect on the level of NPF (Alnabulsi et al., 2022).The results of this study support Dewi et al. (2022) and Sutrisno (2023) regarding the comparison of profitability performance before and after the pandemic.Sharia-based products and services run by Islamic banks continue to produce relatively stable performance even in difficult economic situations, such as the COVID-19 pandemic (Dewi et al., 2022).In addition, the decline in profitability of Sharia banks during COVID-19 is smaller than that of conventional banks (Sutrisno, 2023).These findings confirm that Islamic banks have experience with previous crises so that the current COVID-19 pandemic does not However, the fact is that during the COVID-19 pandemic, most Islamic banks were unable to provide education and training both internally and externally, resulting in the failure to fulfill the regulations regarding education costs of 5% of the banks' workforce.Furthermore, COVID-19 has had an impact on decreasing Islamic bank revenues as a result of the decline in financing growth in 2020 compared to the period before the pandemic.This condition makes Islamic banks increase the efficiency of intermediation costs by optimizing the digitization of banking processes, including digitization of promotional strategies.In this way, research and development costs and promotional costs can be reduced optimally.Thus, this fact supports the study results that the pandemic has an impact on decreasing the performance of maqashid sharia related to educating individuals.
Furthermore, the pandemic factor has been proven to suppress the profit sharing received by depositors (shahibul maal).The COVID-19 pandemic has declined public interest in investing their funds in mudharabah-based savings and deposit schemes that tend to be riskier than wadiah and non-profit sharing schemes (Pransiska & Ilmiah, 2022;Sari & 2021).The decrease in the funds received by banks has resulted in a decrease in the level of profit sharing received by depositors (Muazaroh & Septiarini, 2021), which can be caused by a decrease in the equivalent rate, which is an indication of the level of reward or return on investments made by customers (Asiyah et al., 2022).
The pandemic has also been empirically proven to reduce the amount of zakat and infaq funds that Islamic banks can distribute to the public.However, after the pandemic in 2023, the zakat distributed increased to IDR 173.07 billion from IDR 122.5 billion in 2022 and IDR 94 billion in 2021.The zakat, infaq, and alms distribution program during the pandemic was aimed at helping affected communities to continue to pay attention to health protocols and avoid crowds.In addition, the distribution was also aimed at the fields of education, economy, and health.
The results of testing the determinants of return on equity with control variables show that two control variables (bank size and OER) have a significant effect on return on equity.Furthermore, all control variables (Islamic bank size, operational efficiency ratio, FDR, and NPF) affect ROA.This study proves that the higher the size of a bank, the higher the profitability of the Islamic bank (Sobol et al., 2023;Trad et al., 2017b), and the higher the operational efficiency and non-performing financing ratios, the lower the profitability (Hasibuan et al., 2022;Sobol et al., 2023;Tho'in, 2022;Widarjono et al., 2022).
The other results show that Islamic bank size has an effect on all maqashid sharia performance.The larger the size of a bank, the better the maqashid performance produced.Size still influences the performance of maqashid even though the ASEAN region experienced the COVID-19 pandemic crisis.FDR and NPF have a significant effect on maqashid sharia performance in the aspect of establishing justice.Meanwhile, the operational efficiency ratio (OER) has a significant effect on maqashid performance in the aspect of promoting welfare.The results of this study show that the higher the OER, the greater the amount of zakat and alms funds that Islamic banks can distribute to the community.Zakat and alms distributed by Islamic banks to the community come not only from internal banks but also from external banks such as individual muzakki and corporate muzakki.

CONCLUSION
This study aims to examine the effect of the COVID-19 pandemic on profitability and maqashid sharia performance of Islamic banks.Several control variables used include Islamic bank size, OER, FDR, and NPF.Panel data regression testing is carried out using the EViews 12 on 30 Islamic banks in ASEAN countries in 2015-2021.The model used in hypothesis testing is the random effect model (RAM).This study shows that COVID-19 has no effect on profitability of Islamic banks.The COVID-19 pandemic has an effect on reducing the maqashid performance.
For further research, the same maqashid sharia performance measurements for banks in the Gulf and Europe can be used.Further research can also develop maqashid sharia performance measurements using content analysis on non-Islamic bank entities, such as sharia savings and loan and financing cooperatives, amil zakat institutions, and nazhir waqf institutions.The limitation of this study is that it is hampered in data collection due to differences in annual report templates and financial reports between countries so that it takes a relatively long time to find the required data.This study provides implications regarding the importance of several determinants that affect profitability performance and maqashid sharia performance so that they become the attention of Islamic banks in the ASEAN region.The theoretical contribution of this study is related to the impact of several financial variables and the COVID-19 pandemic on the profitability and maqashid sharia performance of banks.The practical contribution for Islamic banks is in an effort to determine the effect of the economic and monetary crisis on the profitability of banks.Islamic banks can implement strategic policies to reduce profitability risks associated with the aftermath or impact of a crisis.

Table 1 )
, and the number of research observations reached 202 (Table2).
Maqashid sharia performance is represented by three variables: educating individuals, establishing justice, and promoting welfare.The variable of educating individuals is used to measure the ability of Islamic banks to increase the knowl-Banks and Bank Systems, Volume 19, Issue 3, 2024 http://dx.doi.org/10.21511/bbs.19(3).2024.08

Table 1 .
Study samples by country

Table 4 .
Lagrange multiplier test Source: Calculation results using EViews.

Table 5 .
First modelSource: Calculation results using EViews.FDR, and NPF) have an effect on ROA in ASEAN countries (p < 0.05).Adjusted R 2 is 69.6%, meaning that the rise and fall of ROA is determined by the variables at 69.6% (Table6).
The results show that the COVID-19 pandemic has no effect on ROA with a p-value of 0.1511 (p > 0.05).The testing of control variables shows that all control variables (Islamic bank size, operation-al efficiency ratio,

Table 6 .
Second model

Table 7 .
Third model Source: Calculation results using EViews.

Table 8 .
Fourth model

Table 9 .
Fifth model Source: Calculation results using EViews.