An Analysis of Potential Financing Risk Management in Islamic Rural Banks: A Framework of Identification, Measurement, Monitoring, and Mitigation

This research aims to determine the potential of financing risk management in Islamic Rural Banks, focusing on the four key stages: risk identification, measurement, monitoring, and mitigation. An effective risk management becomes essential to ensure financial stability and minimize potential losses. BPRS’s NPF is still above the limit determined by BI. This research object is the BDW Rural Banks, with the subjects being the Board of Directors, Board of Commissioners, Sharia Supervisory Board, PEMR (Risk Management Executive Officer), AO (Account Officer). A mixed method is used in research that determining inherent risks as well as assessing the Quality of Risk Management Implementation (KPMR) by quantitative methods, while qualitative methods are used in the process of identification, monitoring, mitigation, and evaluate KPMR by FGD. The results of the inherent risk measurement are ranked 2 (Low to Moderate), KPMR is at level 1 (Strong). Then, it can be seen that the BPRS BDW risk level determination matrix is at risk level 1, which is categorized as Low. The capital expense that must be reserved to protect financing risk is Rp. 15.658.659.920.