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http://dx.doi.org/10.13106/jafeb.2021.vol8.no1.751

Islamic Bank Efficiency in Indonesia: Stochastic Frontier Analysis  

OCTRINA, Fajra (Faculty of Economic and Business, Telkom University)
MARIAM, Alia Gantina Siti (Business Administration Study Program, Politeknik LP3I Bandung)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.1, 2021 , pp. 751-758 More about this Journal
Abstract
This research is conducted to measure the efficiency level of Islamic banking in Indonesia and also to analyze the factors that can affect its efficiency level. This research used a purposive sampling technique to determine the sample size that will be used, with criteria that the bank has been operating since 2010 and consistently published its financial reports during the research period from 2011 until 2019; therefore, the total sample obtained was 11 samples. Analysis for efficiency level is done by using linear programming Stochastic Frontier Analysis (SFA), with test tool in the form of Frontier 4.1 and Eviews9 to find out what factors that affect efficiency. Efficiency test is done by involving input and output, while influence test used bank-specific variables comprising bank size, bank financial ratio, and macro-economy variable. Research result shows that there are only two banks that are almost close to being fully efficient firms, but the result still does not indicate that Islamic bank works efficiently. Results of the influence test show that factors affecting Islamic banking efficiency in Indonesia are bank size, Capital Adequacy Ratio (CAR), Non-Performing Finance (NPF), and Financing to Deposit Ratio (FDR), while other factors are not influential over the study period.
Keywords
Cost Efficiency; Islamic Bank; Stochastic Frontier Analysis;
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