COMPARING THE EFFICIENCY OF ISLAMIC BANKS IN MALAYSIA AND INDONESIA

Ascarya () and Diana Yumanita ()
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Ascarya: Bank Indonesia
Diana Yumanita: Bank Indonesia

Bulletin of Monetary Economics and Banking, 2008, vol. 11, issue 2, 95-119

Abstract: This study measures and compares the efficiency of Islamic banks in Malaysia and Indonesia using Data Envelopment Analysis (DEA), which is a non-parametric and deterministic methodology for determining the relative efficiency. The intermediation approach will be applied. This study identifies the sources and the level of inefficiency of the inputs and outputs. The results show that the Islamic banking in Indonesia is more efficient than the one in Malaysia in all three measurements; the technical, the scale, and the overall efficiency. Technically, financing is one of the sources of inefficiency in Malaysia, while human resource is one of the sources of inefficiency in Indonesia. Islamic windows should be encouraged to convert to subsidiaries or Islamic full branches to improve the scale and the overall efficiencies in Malaysia. Furthermore, the accelerated expansion both organically and inorganically is needed to improve the scale and the overall efficiencies of the Islamic banking in Indonesia.

Keywords: Islamic banking; performance; efficiency; Data Envelopment Analysis (DEA) (search for similar items in EconPapers)
JEL-codes: C14 G21 G28 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:11:y:2008:i:2a:p:95-119

DOI: 10.21098/bemp.v11i2.237

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