Efficiency of Islamic banks and Conventional banks: Indonesia case
Date Issued
2011
Date
2011
Author(s)
Marlina, Leni
Abstract
The management and operation differences between conventional banks and Islamic banks are a subject of widespread international discussion. What are the differences in comparing these two banking systems? The efficiency of banks has become an important issue after the financial crisis in 1997, not only in Asia but also in many other countries around the world. Especially in Indonesia, where so many banks collapsed during the crisis, it is important to take a closer look at the factor of banking efficiency. It has been shown that the banking sector in Indonesia was not solid enough. Can Islamic banks be taken into consideration as alternatives, or perhaps even provide a solution to help rehabilitate the troubled conventional banks? The purpose of this study is to analyze and compare the technical efficiency of Islamic banks to conventional banks in Indonesia. This study attempts to show to what extent the global financial crisis of 2008 has caused a change in the banking efficiency, especially among Islamic banks, using the DEA (Data envelopment Analysis) method, analyzing twenty four banks from 2004 to 2010.
The overall DEA results proved that the Islamic banks in Indonesia were more efficient than conventional banks in terms of technical efficiency during the global financial crisis. In addition, those conventional banks that opened an Islamic business unit experienced more efficiency than those banks that didn’t.
Subjects
Bank efficiency
Profit and Loss Sharing
Islamic bank
DEA
Type
thesis
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