Non performing financing is a financing risk in sharia financial institution of both banking and non-banking. Non performing financing can be seen from NPF ratio in the respective financial institution. A higher NPF ratio shows a poor quality of financial institution. The objective of this research was to identify the settlement mechanism of non performing financing at KJKS BTM Rembang. This research was conducted at KJKS BTM Rembang using data collecting method of documentation, interview, and library study. The primary data are including the results of interview with marketing and manager office about financing errors. The secondary data are including collectability report, rules, brocure, and the other supported data from KJKS BTM Rembang. Data analysis method used in this research was descriptive-qualitative method. The results of this research found that the scores of Non Performing Financing (NPF) in 2013 up to 2016 were increased while in 2017 were decreased. The health level of KJKS BTM Rembang during the period of 2013-2017 based on the NPF ratio showed that the condition was “unhealthy”. The cause of non performing financing at KJKS BTM Rembang were internal and external factor. The mechanism employed by KJKS BTM Rembang in settling non performing financing were persuasive approach, restructuring such as rescheduling, the issuance of warning letter 1 to 3, and settlement through collateral accordance with BI regulation No. 13/9/PBI/2011.