DETERMINANT OF EFFICIENCY OF THE ISLAMIC BANKING IN INDONESIA

Nadiah Hidayati (), Hermanto Siregar () and Syamsul Hidayat Pasaribu ()
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Nadiah Hidayati: School of Business, Bogor Agricultural University
Hermanto Siregar: Bogor Agricultural University
Syamsul Hidayat Pasaribu: Bogor Agricultural University

Bulletin of Monetary Economics and Banking, 2017, vol. 20, issue 1, 29-48

Abstract: Dual banking system in Indonesia provides an excellent opportunity for the growth of Islamic banking industry in Indonesia. Islamic banking industry in Indonesia has improved in number of banks and branches but the performance of Islamic banks has decreased in recent years. This paper measures the efficiency of Islamic banking in Indonesia using the intermediation approach and the Data Envelopment Analysis (DEA) on quarterly reports of 10 Islamic Banks (BUS) and 15 Islamic Business Units (UUS). The results showed that Islamic Banks (BUS) and Islamic Business Units (UUS) in Indonesia has not been operating efficiently in its intermediation function. The estimation results of data panel regression model showed total financing and CAR have positive and significant impact, whereas the deposits have negative and significant impact to the efficiency of BUS and UUS in Indonesia.

Keywords: Data panel; DEA; efficiency; Indonesia; Islamic banking (search for similar items in EconPapers)
JEL-codes: C63 G14 G21 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:20:y:2017:i:1a:p:29-48

DOI: 10.21098/bemp.v20i1.723

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