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Comparative Analysis of the Financial Performance of Regional Development Banks before and after Conversion to Islamic Banks

Author

Listed:
  • Laela Asri Hidayati

    (University of Mataram, Mataram, Indonesia)

  • Susi Retna Cahyaningtyas

    (University of Mataram, Mataram, Indonesia)

Abstract

In Indonesia, the government encourages converting conventional regional development banks into sharia regional development banks. Such banks should become the driving force and the stimulator of a sharia ecosystem in the region, especially to support the development of regional economic potentials and to become a prosperous and peaceful country. This study aims to analyze the financial performance of regional development banks that have become sharia regional development banks to identify their ability to continue to provide economic growth in the region. Considering the results of previous studies, the authors conduct a comparative analysis of the financial performance of regional development banks that have converted to sharia banks using the following variables: return on assets (ROA), return on equity (ROE), loan-to-deposit ratio (LDR) / financing-to-deposit ratio (FDR), net interest margin (NIM) / net operating margin (NOM) and ratio of operating expenses to operating income (BOPO). The analysis aims to determine whether there is a significant difference in the financial performance between conventional and sharia regional development banks. The population in this study is the regional development bank, with a sample of 3 banks that have converted into sharia banks (Bank Aceh Shariah, Bank NTB Shariah, and Bank Riau Kepri Shariah). The study uses secondary bank data from quarterly financial reports on the banks' websites. The independent sample t-test is used to test the performance of conventional and sharia banks. The study results indicate no significant differences in the financial performance of regional development banks as measured using the financial ratio indicators ROA, ROE, and LDR. However, there are significant differences in measurements using the NIM and BOPO ratio indicators. Although the financial performance of sharia banks is still lower than that of conventional banks, they are showing an upward trend.

Suggested Citation

  • Laela Asri Hidayati & Susi Retna Cahyaningtyas, 2024. "Comparative Analysis of the Financial Performance of Regional Development Banks before and after Conversion to Islamic Banks," Oblik i finansi, Institute of Accounting and Finance, issue 1, pages 147-156, March.
    • Handle: RePEc:iaf:journl:y:2024:i:1:p:147-156
    DOI: 10.33146/2307-9878-2024-1(103)-147-156
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    More about this item

    Keywords

    regional development banks; Islamic banking system; financial performance; ROA; ROE; LDR; FDR; NIM; NOM; BOPO;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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