Does ESG Performance Affect Non-performing Financing? Evidence from Islamic Banks in OIC Countries

Bayu Arie Fianto; Alif Fahril Aziz; Putri Reno Kemala Sari; Dian Filianti; Hesti Eka Setianingsih

doi:10.1007/978-3-031-99466-1_24

Does ESG Performance Affect Non-performing Financing? Evidence from Islamic Banks in OIC Countries

Bayu Arie Fianto
, Alif Fahril Aziz
, Putri Reno Kemala Sari
, Dian Filianti
, Hesti Eka Setianingsih

Research output: Chapter in Book/Report/Conference proceeding › Chapter › peer-review

Abstract

This paper intends to discuss the internal banking factors and the performance of Environmental, Social, and Governance dimensions as influential factors of non-performing financing within Islamic banks in the Organization of Islamic Cooperation countries. Based on 388 observations from 50 Islamic banks between 2015 and 2022, panel data regression and system dynamics analysis indicate that profitability, as expressed by ROA, financing growth, and ESG scores, are negatively related to NPF, hence mitigating the risks of financing. On the contrary, CAR, FLP, and lagged NPF (NPF_t-1) are positively related to a high level of risk of NPF. This paper highlights new facts related to sustainable finance in Islamic banking, particularly for the countries belonging to OIC, based on ESG performance integration. Results highlight that ESG integration is an integral factor contributing, together with strong profitability and sound risk management, to increasing financial stability and resilience.

Original language	English
Title of host publication	Studies in Systems, Decision and Control
Publisher	Springer Science and Business Media Deutschland GmbH
Pages	239-250
Number of pages	12
DOIs	https://doi.org/10.1007/978-3-031-99466-1_24
Publication status	Published - 2026

Publication series

Name	Studies in Systems, Decision and Control
Volume	612
ISSN (Print)	2198-4182
ISSN (Electronic)	2198-4190

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 10 Reduced Inequalities

Keywords

Economic growth
ESG
Non-performing financing
OIC countries

Access to Document

10.1007/978-3-031-99466-1_24

Cite this

Fianto, B. A., Aziz, A. F., Sari, P. R. K., Filianti, D., & Setianingsih, H. E. (2026). Does ESG Performance Affect Non-performing Financing? Evidence from Islamic Banks in OIC Countries. In Studies in Systems, Decision and Control (pp. 239-250). (Studies in Systems, Decision and Control; Vol. 612). Springer Science and Business Media Deutschland GmbH. https://doi.org/10.1007/978-3-031-99466-1_24

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title = "Does ESG Performance Affect Non-performing Financing? Evidence from Islamic Banks in OIC Countries",

abstract = "This paper intends to discuss the internal banking factors and the performance of Environmental, Social, and Governance dimensions as influential factors of non-performing financing within Islamic banks in the Organization of Islamic Cooperation countries. Based on 388 observations from 50 Islamic banks between 2015 and 2022, panel data regression and system dynamics analysis indicate that profitability, as expressed by ROA, financing growth, and ESG scores, are negatively related to NPF, hence mitigating the risks of financing. On the contrary, CAR, FLP, and lagged NPF (NPFt-1) are positively related to a high level of risk of NPF. This paper highlights new facts related to sustainable finance in Islamic banking, particularly for the countries belonging to OIC, based on ESG performance integration. Results highlight that ESG integration is an integral factor contributing, together with strong profitability and sound risk management, to increasing financial stability and resilience.",

keywords = "Economic growth, ESG, Non-performing financing, OIC countries",

author = "Fianto, \{Bayu Arie\} and Aziz, \{Alif Fahril\} and Sari, \{Putri Reno Kemala\} and Dian Filianti and Setianingsih, \{Hesti Eka\}",

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doi = "10.1007/978-3-031-99466-1\_24",

language = "English",

series = "Studies in Systems, Decision and Control",

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Fianto, BA, Aziz, AF, Sari, PRK, Filianti, D & Setianingsih, HE 2026, Does ESG Performance Affect Non-performing Financing? Evidence from Islamic Banks in OIC Countries. in Studies in Systems, Decision and Control. Studies in Systems, Decision and Control, vol. 612, Springer Science and Business Media Deutschland GmbH, pp. 239-250. https://doi.org/10.1007/978-3-031-99466-1_24

Does ESG Performance Affect Non-performing Financing? Evidence from Islamic Banks in OIC Countries. / Fianto, Bayu Arie; Aziz, Alif Fahril; Sari, Putri Reno Kemala et al.
Studies in Systems, Decision and Control. Springer Science and Business Media Deutschland GmbH, 2026. p. 239-250 (Studies in Systems, Decision and Control; Vol. 612).

Research output: Chapter in Book/Report/Conference proceeding › Chapter › peer-review

TY - CHAP

T1 - Does ESG Performance Affect Non-performing Financing? Evidence from Islamic Banks in OIC Countries

AU - Fianto, Bayu Arie

AU - Aziz, Alif Fahril

AU - Sari, Putri Reno Kemala

AU - Filianti, Dian

AU - Setianingsih, Hesti Eka

PY - 2026

Y1 - 2026

N2 - This paper intends to discuss the internal banking factors and the performance of Environmental, Social, and Governance dimensions as influential factors of non-performing financing within Islamic banks in the Organization of Islamic Cooperation countries. Based on 388 observations from 50 Islamic banks between 2015 and 2022, panel data regression and system dynamics analysis indicate that profitability, as expressed by ROA, financing growth, and ESG scores, are negatively related to NPF, hence mitigating the risks of financing. On the contrary, CAR, FLP, and lagged NPF (NPFt-1) are positively related to a high level of risk of NPF. This paper highlights new facts related to sustainable finance in Islamic banking, particularly for the countries belonging to OIC, based on ESG performance integration. Results highlight that ESG integration is an integral factor contributing, together with strong profitability and sound risk management, to increasing financial stability and resilience.

AB - This paper intends to discuss the internal banking factors and the performance of Environmental, Social, and Governance dimensions as influential factors of non-performing financing within Islamic banks in the Organization of Islamic Cooperation countries. Based on 388 observations from 50 Islamic banks between 2015 and 2022, panel data regression and system dynamics analysis indicate that profitability, as expressed by ROA, financing growth, and ESG scores, are negatively related to NPF, hence mitigating the risks of financing. On the contrary, CAR, FLP, and lagged NPF (NPFt-1) are positively related to a high level of risk of NPF. This paper highlights new facts related to sustainable finance in Islamic banking, particularly for the countries belonging to OIC, based on ESG performance integration. Results highlight that ESG integration is an integral factor contributing, together with strong profitability and sound risk management, to increasing financial stability and resilience.

KW - Economic growth

KW - ESG

KW - Non-performing financing

KW - OIC countries

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BT - Studies in Systems, Decision and Control

PB - Springer Science and Business Media Deutschland GmbH

ER -

Does ESG Performance Affect Non-performing Financing? Evidence from Islamic Banks in OIC Countries

Abstract

Publication series

UN SDGs

Keywords

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Cite this