Ernawati2019-09-252019-09-252016-02-292016-01http://hdl.handle.net/20.500.12424/235011This study analyzes the risk of profit-and-loss sharing finance in Indonesian Islamic banking. Data used is secondary data obtained from the Financial Services Authority’s 2009-2014 publication. Financing risk is measured by risk return and opportunity cost. The results of the study show that risk return in mudharaba financing is more volatile than in musharaka as it is potentially driven by agency problems. In all groups of banks, higher incomes are more promising in mudharaba than musharaka; but individually musharaka is more attractive to Islamic Rural Bank groups, and vice versa for the Sharia Bank groups. In other side, it is more secure for Islamic banking to allocate funds in musharaka contract, which is an alternative to murabaha. However, musharaka contract is less attractive due to lower potential returns. Although high returns are more promising in mudaraba, this financing mode has higher risk of returns.engWith permission of the license/copyright holderrisk averseprofit-loss sharingmurabahamusharakamudharabaEconomic ethicsEthics of economic systemsReligious ethicsSpirituality and ethicsMethods of ethicsGeneral and historicalPhilosophical ethicsJournal volume