Authors:
Umar Faruk
;
Disman Disman
and
Nugraha Nugraha
Affiliation:
Universitas Pendidikan Indonesia, Jl. Dr. Setiabudhi, 229, 40154, Bandung and Indonesia, Indonesia
Keyword(s):
Data Envelopment Analysis (DEA), Efficiency, Islamic Bank, Indonesia, Malmquist Productivity Index (MPI), Productivity Growth.
Abstract:
The purpose of this paper is to examine the efficiency and productivity growth of the Islamic Banking in Indonesia. The paper utilizes 11 banks for the duration of 2009 to 2015. Data envelopment Analysis (DEA) technique is applied to compute technical efficiency, pure technical efficiency and scale efficiency. Also, Malmquist Productivity Index (MPI) is used to identify the sources of productivity growth of the banks. The result suggest that Indonesian Islamic Banks are operating below optimum performance and were managerially incompetent in using their input resources effectively even though they have been operating at a reasonably optimal scale of operation. Islamic banks seem to be affected during the period of the global financial crisis from 2008 to 2009. In terms of productivity growth, all the Islamic Banks in Indonesia were experiencing a decline in productivity mainly attributed to less technological innovation in the Islamic Banking industry in Indonesia. There is less tech
nological innovation in the Islamic Banking industry of Indonesia. There is the need for more innovative financial services in terms of improvement in banking technology. This study is pioneering effort in the application Malmquist Productivity Index (MPI) to study about the Islamic Banking sector in Indonesia.
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