Do Indonesia Islamic Banks Perform Better Than Malaysia? A Malmquist Index Approach
DOI:
https://doi.org/10.58968/ria.v3i1.297Keywords:
Productivity, Islamic Banks, Indonesia, Malaysia, Malmquist Index, MPIAbstract
This study aims to measure the productivity of Islamic banks in Indonesia and Malaysia using the Malmquist Productivity Index (MPI) method with the research period 2010-2019. The research objects used are 23 Islamic banks in Indonesia and Malaysia. The data of this study comes from the annual financial statements of each bank from the period 2010-2019. The input variables in this study are employee costs, administrative costs and third-party funds. And for the output variable is financing and operating income. The results of this study explain that during the period 2010-2019, the productivity level of Islamic banks in Indonesia and Malaysia has a fluctuating trend from year to year. Based on the average TFPCH score, it is concluded that the productivity of Islamic banks shows no increase in productivity or constant and technological change has not contributed optimally to the increase in productivity of Islamic banks in Indonesia and Malaysia. Furthermore, analyzing individually on Islamic Banks in Indonesia and Malaysia, it is found that there are 8 Islamic Banks with increased productivity, one Islamic bank in Malaysia and seven Islamic banks in Indonesia. The results also highlighted that the productivity level of Islamic banks in Indonesia is relatively better than Islamic banks in Malaysia. Then, the Malmquist Index quadrant analysis found that Islamic Banks in Indonesia and Malaysia dominate in quadrant 3 with a total of 12 Islamic Banks, followed by quadrant 4 with a total of 7 Islamic banks, and quadrant 1 with a total of 4 Islamic banks.
Downloads
References
Abdullah, A. (2017). A comparison between Malaysia and Indonesia in Islamic banking industry. Research Journal of Business and Management, 4(3), 276-286. https://doi.org/10.17261/Pressacademia.2017.705
Adriani, D., & Wiksuana, I. (2018). Financial Inclusion in its Relationship with MSME Growth and Community Welfare Level in Bali Province. E-Journal of Management, 7(12), 6420 - 6444. doi:10.24843/EJMUNUD.2018.v07.i12.p02
Ahmed, I. A. (2013). Islamic Banking Growth: Role of Technology. Available at SSRN. http://dx.doi.org/10.2139/ssrn.2304314
Alexakis, C., Izzeldin, M., Johnes, J., & Pappas, V. (2019). Performance and productivity in Islamic and conventional banks: Evidence from the global financial crisis. Economic Modeling, 79, 1-14. https://doi.org/10.1016/j.econmod.2018.09.030
Alnsour, I. (2023). The effect of financial technology on Islamic banks performance in Jordan: Panel data analysis. International Journal of Data and Network Science, 7(4), 1515-1524.: https://doi.org/10.5267/j.ijdns.2023.8.011
Ascarya, A., & Yumanita, D. (2008). Comparing the efficiency of Islamic banks in Malaysia and Indonesia. Bulletin of Monetary Economics and Banking, 11(2), 95-119.
As-Salafiyah, A. (2023). Productivity of Rural Banks in Central Java: Is Technological Changes Matter?. Islamic Economics Methodology, 2(1).
Basri, M. F., Muhamat, A. A., & Jaafar, M. N. (2018). The efficiency of Islamic banks in Malaysia: Based on DEA and Malmquist productivity index. Journal of Emerging Economies and Islamic Research, 6(3), 15-27. https://doi.org/10.24191/jeeir.v6i3.8784
Berger, A. N., Molyneux, P., & Wilson, J. O. (2020). Banks and the real economy: An assessment of the research. Journal of Corporate Finance, 62, 101513. https://doi.org/10.1016/j.jcorpfin.2019.101513
Caves, D. W., Christensen, L. R., & Diewert, W. E. (1982). The economic theory of index numbers and the measurement of inputs, outputs, and productivity. Econometrica: Journal of the Econometric Society, 50(6), 1393-1414.
Chowdhury, M. A. M., & Haron, R. (2021). The efficiency of Islamic Banks in the Southeast Asia (SEA) region. Future Business Journal, 7, 1-16. https://doi.org/10.1186/s43093-021-00062-z
Färe, R., Grosskopf, S., Norris, M., & Zhang, Z. (1994). Productivity growth, technical progress, and efficiency change in industrialized countries. The American Economic Review, 84(1), 66-83.
Firmansyah, I. (2019). Measuring of Islamic Banking Productivity in Indonesia Using Malmquist Index. 203 (Iclick 2018), 251-254. https://doi.org/10.2991/iclick-18.2019.51
Grassa, R., & Gazdar, K. (2014) Financial Development and Economic Growth in GCC Countries: A Comparative Study between Islamic and Conventional Finance. International Journal of Social Economics, Vol. 41 No. 6, 20. Available at SSRN: https://ssrn.com/abstract=2449522
Haque, A. Y. I., Erianto, H., Mega, H., & Harianti, F. Comparative Study on the Islamic Banking between Indonesia and Malaysia.
Herindar, E., Uula, M. M., & Rusydiana, A. S. (2021). Measuring Islamic Rural Banks Productivity in Indonesia 2016- Quadrant Analysis, Technological Change, and Covid-19 Pandemic Impact. Review on Islamic Accounting, 1(1). https://doi.org/10.58968/ria.v1i1.90
Hussain, M., Shahmoradi, A., & Turk, R. (2016). An overview of Islamic finance. Journal of International Commerce, Economics and Policy, 7(01), 1650003.
Ikhwan, I., & Riani, R. (2023). Stability Of Islamic Bank Efficiency In Indonesia And Malaysia: Has Covid-19 Made Any Difference? Journal of Islamic Monetary Economics and Finance, 9(3), 491-510. https://doi.org/10.21098/jimf.v9i3.1526
Imam, P., & Kpodar, K. (2016). Islamic banking: good for growth? Economic Modeling, 59, 387-401.
Izzeldin, M., Johnes, J., Ongena, S., Pappas, V., & Tsionas, M. (2021). Efficiency convergence in Islamic and conventional banks. Journal of International Financial Markets, Institutions and Money, 70, 101279. https://doi.org/10.1016/j.intfin.2020.101279
Johnson, K. (2013). The role of Islamic banking in economic growth. CMC Senior Theses. Paper 642. http://scholarship.claremont.edu/cmc_theses/642
Johnson, K. (2013). The role of Islamic banking in economic growth. https://scholarship.claremont.edu/cgi/viewcontent.cgi?article=1618&context=cmc_theses
Jubilee, R. V. W., Kamarudin, F., Latiff, A. R. A., Hussain, H. I., & Tan, K. M. (2021). Do Islamic versus conventional banks progress or regress in productivity levels?. Future Business Journal, 7(1), 1-22. https://doi.org/10.1186/s43093-021-00065-w
Juhandi, N., Rahardjo, B., Tantriningsih, H. A., & Fahlevi, M. (2019). The Growth Of Sharia Banking In Asia. Journal of Research in Business, Economics and Management, 12(2), 2341-2347.
Kamarudin, F., Hue, C. Z., Sufian, F., & Mohamad Anwar, N. A. (2017). Does the productivity of Islamic banks endure progress or regress? Empirical evidence using Data Envelopment Analysis based on Malmquist Productivity Index. Humanomics, 33(1), 84-118. https://doi.org/10.1108/H-08-2016-0059
Karanlioglu, G., & Musajeva, S. (2017). Comparison of Efficiency and Productivity between Islamic Banks in the GCC region: A quantitative study using DEA and Malmquist index.
Knight, M. D. (2007, December). The growing importance of Islamic finance in the global financial system. In Remarks at the 2nd Islamic Financial Services Board Forum, Frankfurt (Vol. 6).
Komijani, A., & Taghizadeh-Hesary, F. (2018). An overview of Islamic banking and finance in Asia. https://www.adb.org/publications/overview-islamic-banking-and-finance-asia
Kopelman, R. E. (1986). Managing productivity in organizations: A practical, people-oriented perspective. McGraw-Hill College.
Maradin, D., Suljić Nikolaj, S., & Olgić Draženović, B. (2021). Efficiency and productivity of Islamic banking industry by using DEA method: a literature review. The Changing Financial Landscape: Financial Performance Analysis of Real and Banking Sectors in Europe, 205-217.
Marlina, L., Rusydiana, A. S., & Athoillah, M. A. (2018). Malmquist index to measure the efficiency and productivity of indonesia islamic banks. In 2nd ICIFEB 2018 International Conference on Islamic Finance Economics and Business UIN Syarif Hidayatullah Jakarta. State Islamic University Syarif Hidayatulloh Jakarta.
Masrizal, Sukmana, R., Fianto, B. A., & Gultom, R. Z. (2022). Does economic freedom fosters Islamic rural banks efficiency? Evidence from Indonesia. International Journal of Productivity and Performance Management. https://doi.org/10.1108/IJPPM-11-2021-0660
Mawarati, S. (2016). Comparison of efficiency and productivity between western Bprs and eastern Bprs in Indonesia (Bachelor's thesis, Jakarta: Faculty of Sharia and Law UIN Syarif Hidayatullah, 2016. http://repository.uinjkt.ac.id/dspace/handle/123456789/32911
Mongid, A., & Tahir, I. M. (2010). Technical and scale efficiency of Indonesian rural banks. Banks and Bank Systems, 5(3), 80-86.
Nugrohowati, R. N. I., Fakhrunnas, F., & Haron, R. (2020). Examining technological and productivity change in the Islamic banking industry. Pertanika Journal of Social Sciences and Humanities, 28(4), 3355-3374. https://doi.org/10.47836/pjssh.28.4.47
Orix. (2023). Sharia Finance: Unlocking the potential of ethical financing in Indonesia and Malaysia. Orix. https://www.orix.co.jp/grp/en/orix_in_action/entry/2023/05/18/100000
Rahayu, S. S. (2023). Measuring Productivity of Pesantren Cooperative using Malmquist Index. The Economic Review of Pesantren, 2(1).
Rani, L. N., Sukmaningrum, P. S., & Salleh, M. C. M. (2020). A Comparative Analysis of the Productivity of Islamic Banking in Indonesia, Malaysia and Brunei Darussalam during the period 2012-2017. International Journal of Innovation, Creativity and Change, 11(11), 470-491.
Rodoni, A., Salim, M. A., Amalia, E., & Rakhmadi, R. S. (2017). Comparing efficiency and productivity in Islamic banking: Case study of Indonesia, Malaysia and Pakistan. Al-Iqtishad: Journal of Islamic Economics, 9(2), 227-242.
Rusydiana, A. S., & Widiastuti, T. (2018). Technological and efficiency change on zakat organization: Evidence in Indonesia. In Indonesian Conference of Zakat-Proceedings.
S&P Global. (2022). Growing Confidence in Southeast Asia's US$290 Billion Islamic Banking Market. S&P Global. https://www.spglobal.com/ratings/en/research/articles/220511-growing-belief-in-southeast-asia-s-us-290-billion-islamic-banking-market-12373158
Sharma, D., Sharma, A.K. and Barua, M.K. (2013), "Efficiency and productivity of banking sector: A critical analysis of literature and design of conceptual model", Qualitative Research in Financial Markets, Vol. 5 No. 2, pp. 195-224. https://doi.org/10.1108/QRFM-10-2011-0025
Supartoyo, Y. H., Juanda, B., Firdaus, M., & Effendi, J. (2018). The influence of the financial sector of rural banks on the regional economy of the sulawesi region. Review of Economics and Finance, 2(1), 15-38. https://doi.org/10.31685/kek.v2i1.207
Tongurai, J., & Vithessonthi, C. (2018). The impact of the banking sector on economic structure and growth. International Review of Financial Analysis, 56, 193-207. https://doi.org/10.1016/j.irfa.2018.01.002
Vernardos, M. (2007). Islamic Banking and Finance in South-east Asia. In Its Development and Future. IQPC Worldwide Business Conference. https://doi.org/10.1142/6179
Zarrouk, H., El Ghak, T. and Abu Al Haija, E. (2017), "Financial development, Islamic finance and economic growth: evidence from the UAE", Journal of Islamic Accounting and Business Research, Vol. 8 No. 1, pp. 2-22. https://doi.org/10.1108/JIABR-05-2015-0020
Zavadska, D. (2020). Scientific rationale for the influence of the banking sector on the innovative development of the economy. Financial and Credit Activity: Problems of Theory and Practice, 3(34), 52-62. https://doi.org/10.18371/fcaptp.v3i34.215409
Downloads
Published
How to Cite
Issue
Section
