Indonesian Islamic banks: A review of the financial state before and after the COVID-19 pandemic

  • Received June 24, 2022;
    Accepted September 8, 2022;
    Published October 6, 2022
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/bbs.17(4).2022.02
  • Article Info
    Volume 17 2022, Issue #4, pp. 12-24
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Banking plays an important role in business and economic growth. However, since a couple decades ago, there have been issues with efficiency and performance. This paper aims to examine Indonesia’s Islamic banking performance through non-parametric production efficiency analysis before and after the COVID-19 pandemic, 2010–2021. This study differentiated between different dimensions of Indonesia’s Islamic banks (IIB) finance and non-finance aspects, as well as investigated the relationships between these dimensions of finance, including assets, deposits, equity, financing, and income, and non-financial variables, namely employees and offices. Non-parametric analysis, with the input-oriented variable constant return to scale (CRS) and returns to scale (VRS) models as a framework, data envelopment analysis (DEA) is used to calculate the IIB of overall, pure, and scale efficiency. However, the resources of technology IIB management are lacking, as well as macroeconomic and environmental effects. This study found that IIB operational needs to enhance investment in technology beyond the office. This means that the number of offices has a smaller impact on enhancing deposits and revenue. Technology investment has a crucial role in enhancing IIB equity, income, and innovation service. As a result, IIB managers and policymakers must improve their efficiency scores in order to increase competition and innovation. Furthermore, IIB needs to increase and spend their assets and experience to enhance technology, which significantly affects efficiency.

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    • Table 1. Indonesian Islamic Banks (IIB) data and indicators
    • Table 2. Correlation and descriptive variables
    • Table 3. Descriptive statistics of annual efficiency score of IIBs
    • Table 4. Descriptive statistics of efficiency scores across banks
    • Table 5. Annual evolution of efficiency scores per category
    • Conceptualization
      Dirgahayu Lantara
    • Data curation
      Dirgahayu Lantara, Junaidi Junaidi
    • Formal Analysis
      Dirgahayu Lantara, Junaidi Junaidi, A. Pawennari, Ratu Noorita Achmad
    • Funding acquisition
      Dirgahayu Lantara, Nurhayati Rauf, A. Pawennari
    • Supervision
      Dirgahayu Lantara, Nurhayati Rauf, A. Pawennari
    • Writing – original draft
      Dirgahayu Lantara, Junaidi Junaidi, Nurhayati Rauf, A. Pawennari, Ratu Noorita Achmad
    • Writing – review & editing
      Dirgahayu Lantara, Junaidi Junaidi, A. Pawennari, Ratu Noorita Achmad
    • Software
      Junaidi Junaidi
    • Validation
      Junaidi Junaidi, Nurhayati Rauf, A. Pawennari, Ratu Noorita Achmad
    • Methodology
      Nurhayati Rauf, Ratu Noorita Achmad