The determinant factors of efficiency on Islamic banking and conventional banking in Indonesia

Abstract

As intermediary institutions, conventional banks have larger amount of loans tothird party funds than of Sharia banks. Thus, the bank needs a performance appraisalto measure banking operations through efficiency. We examine the efficiency ofIslamic banks and conventional banks in Indonesia and analyzes the factors thatinfluence the level of efficiency known as the Two-Stage Data Envelopment Analysismethod. We found that there are significant efficiency differences between Islamicbanking and conventional banking in the 1st quarter 2014- 4th quarter 2017. On theother hand, NPF and NPL results affected negatively towards Islamic and conven-tional banks efficiency. Asset and CAR affected positively significant toward Islamicbanks efficiency. Asset and ROA had affected positively significantly toward con-ventional banks efficiency but CAR had affected positively insignificantly towardconventional banks. Lastly, ROA had affected positively insignificantly toward Is-lamic banks efficiency