Banking is an institution which has its operations highly regulated by the government, thus the management must be able to manage risks. The purpose of this study is to examine the effect of risk management on the performance of Islamic rural banking in Indonesia. The performance of Islamic rural banking is measured by return on assets (ROA), while risk management consists of financing risk that measured by nen-performing financing (NPF), capital risk as measured by capital adequacy ratio (CAR), liquidity risk as measured by financing do deposit ratio (FDR), risk of management as measured by net profit margin (NPM), and operating risk is measured by operating expense to operating income ratio (OEOI). The population of this study was the Islamic rural banking operating in Indonesia with a sample consisted of 55 banks taken by using purposive sampling method. The observation was conducted in 2 years (2015-2016) with quarterly data. The hypothesis test was conducted by using multiple regression analysis and was assisted by using SPSS version 17.0 program. The results showed that financing risk (NPF) and operating risk (OEOI) had a negative and significant effect on bank performance, while liquidity risk (FDR) and risk of management (NPM) had a positive and significant effect on bank performance. Meanwhile, capital risk (CAR) had no significant effect on bank performance.
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