The Efficiency and Stability of the Islamic-Banking Industry in Indonesia, Malaysia, and the Middle-East

DOI

10.2991/aebmr.k.220501.037How to use a DOI?

Keywords

Technical efficiency; financial stability; Islamic banks; intermediation approach

Abstract

The Indonesian Islamic banking industry has a lot of potentials, yet its market share has not risen above 7%. Comparing the number of total assets, the Indonesian Islamic-banking industry only makes up around 2% of the total global Islamic-banking assets. The Islamic-banking sector plays an important role in helping promote the national economic growth. It is crucial for an industry to be able to maintain this positive trend or momentum in order to increase the market share of the Islamic-banking industry given its enormous potential. Therefore, the efficiency of a bank is very important, thus needs more attention. In addition to measuring efficiency, the finances of Islamic-banking industry also need to be measured to determine its resilience to fluctuations in the market. The aim of this research was to compare the differences between the Islamic-banking industry in Indonesia and industry leaders, namely Malaysia and the countries in Middle-East region. The data used for this research was collected from the yearly financial statements published in the banks’ official websites in the period from 2016 to 2020. The collected data was then analyzed using the Stochastic-Frontier Analysis (SFA) and the Z-score technique. Intermediation approach was used in this research. Thus, the total financing was used as output variable, and total fixed assets, total third-party funding, and total staff cost were used as the input variables. The results indicate that the Indonesian Islamic-banking industry is less efficient than that in Malaysia and the Middle-East countries, but it is more stable. The OLS regression showed that all input variables have a positive effect on efficiency, specifically third-party funding is the most significant variable towards the Islamic-banking efficiency.

Copyright

© 2022 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article distributed under the CC BY-NC 4.0 license.

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TY  - CONF
AU  - Yohanes Amadeus Raditya
AU  - Buddi Wibowo
PY  - 2022
DA  - 2022/05/11
TI  - The Efficiency and Stability of the Islamic-Banking Industry in Indonesia, Malaysia, and the Middle-East
BT  - Proceedings of the tenth International Conference on Entrepreneurship and Business Management 2021 (ICEBM 2021)
PB  - Atlantis Press
SP  - 240
EP  - 248
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.220501.037
DO  - 10.2991/aebmr.k.220501.037
ID  - Raditya2022
ER  -