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Comparing The Efficiency Of Islamic Banks In Malaysia And Indonesia

Author

Listed:
  • Ascarya

    (Bank Indonesia)

  • Diana Yumanita

    (Bank Indonesia)

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.

Suggested Citation

  • Ascarya & Diana Yumanita, 2008. "Comparing The Efficiency Of Islamic Banks In Malaysia And Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 11(2), pages 1-27, October.
    • Handle: RePEc:idn:journl:v:11:y:2008:i:2:p:1-27
    DOI: https://doi.org/10.21098/bemp.v11i2.237
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    Cited by:

    1. repec:idn:jimfjn:v:3:y:2018:i:specialissuee:p:1-20 is not listed on IDEAS
    2. Mohamad, Nurul Muna & Masron, tajul & Widiyanti, Risna & Mohd Jamil, Muslimah, 2020. "Islamic Banking and Income Inequality: The Role of Corporate Social Responsibility," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 54(2), pages 77-90.
    3. Muhammad Nur Rianto Al Arif, 2018. "Spin-off, market structure, and deposit funds in an Islamic banking industry," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 10(2), pages 187-193, Oktober.
    4. Muhammad Ichsan Hadjri & Badia Perizade & Taufiq Marwa & Agustina Hanafi, 2019. "Islamic Human Resource Management, Organizational Commitment and Employee Performance: A Case Study on Sharia Bank in South Sumatera," International Review of Management and Marketing, Econjournals, vol. 9(1), pages 123-128.
    5. HASIB Fatin Fadhilah & LAILA Nisful & SUKMANINGRUM Puji Sucia, 2018. "Comparing The Efficiency Of Islamic Bank In Indonesia And Malaysia," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 70(4), pages 46-67, September.
    6. LAILA Nisful & MAULIDIYAH Hikmah & CAHYONO Eko Fajar, 2018. "Comparing The Efficiency Of Islamic Bank In Indonesia And Malaysia," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 70(2), pages 48-67, August.
    7. Mohammad Abdul Matin Chowdhury & Razali Haron, 2021. "The efficiency of Islamic Banks in the Southeast Asia (SEA) Region," Future Business Journal, Springer, vol. 7(1), pages 1-16, December.

    More about this item

    Keywords

    Islamic banking; performance; efficiency; Data Envelopment Analysis (DEA);
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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