Does economic freedom fosters Islamic rural banks efficiency? Evidence from Indonesia

Masrizal,; Sukmana, Raditya; Fianto, Bayu Arie; Gultom, Rifyal Zuhdi

doi:10.1108/ijppm-11-2021-0660

Cited by 10 publications

(10 citation statements)

References 74 publications

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“…By assuming constant returns to scale (CRS), the CCR model assumes that there is no significant relationship between the scale of operations and efficiency and is only valid when all decision-making units' function at the optimal scale. However, technological developments and regulatory changes may result in either economies or diseconomies of scale for banks of varying sizes (Masrizal et al, 2022). Banker et al (1984) extend the CCR model by reducing the CRS assumption in order to address this issue.…”

Section: Data Envelopment Analysismentioning

confidence: 99%

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Efficiency Comparison between Conventional and Islamic Rural Banks in Sumatra during the COVID-19 Pandemic

Akbar,

Ikhwan,

Riani

2023

MBER

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This study aims to examine and compare the efficiency of conventional rural banks and Islamic rural banks in their roles as intermediary institutions during the COVID-19 pandemic in Sumatra, Indonesia. Furthermore, the efficiency determinants were further analysed to find some variables that affect rural banks’ efficiency. Non-Parametric approach, Data Envelopment Analysis (DEA), and Tobit Regression are employed in this study. The results show that Islamic rural banks have better efficiency performance compared to conventional rural banks, but that there is a fluctuating efficiency trend experienced by both types of rural banks during the observation period. In addition, the potential improvement result indicates that financing and operating revenue variables are the main causes of rural bank inefficiency. Furthermore, the Tobit Regression result finds that capital and bank size significantly improve the efficiency level, but that risk significantly reduces bank efficiency.

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Section: Data Envelopment Analysismentioning

confidence: 99%

“…If the score is below 1, the decision-making unit (DMU) is technically inefficient and not running efficiently. In contrast, the DMU will be deemed technically efficient if the TE score reflects its worth (Masrizal et al, 2022).…”

Section: Data Envelopment Analysismentioning

confidence: 99%

Efficiency Comparison between Conventional and Islamic Rural Banks in Sumatra during the COVID-19 Pandemic

Akbar,

Ikhwan,

Riani

2023

MBER

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“…10 of 1998 concerning Banking). Masrizal et al, 2022 in his research stated that BPRS carries out business activities by providing products and services that target the micro sector and people with low incomes. By upholding the operational principle of no usury, BPRS has similarities with other Islamic financial institutions (Iqbal, 1997).…”

Section: Islamic Rural Banksmentioning

confidence: 99%

“…This means that there is still 9.88 percent that can be optimized to improve the performance of the BPRS. Masrizal et al (2022) explain the reasons for factors that may affect the efficiency of a BPRS, namely that overall economic freedom has a strong beneficial impact on the efficiency of a BPRS and mention that when financial intermediaries operate in a less constrained environment, they tend to pursue competitive practices that increase operating rates and other efficiency metrics.…”

Section: Previous Studiesmentioning

confidence: 99%

Non-parametric Efficiency of Islamic Rural Banks in Indonesia

Aam¹,

Mimma

Syahdatul

2022

IEM

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In the midst of economic challenges and uncertainty due to the pandemic, BPRS as part of the banking industry has a specific goal, namely to provide financial services and products to people with a weak economic level and also the MSME sector, therefore it is necessary to accelerate improvements in the Islamic rural banks (BPRS) industry. This study aims to measure the relative efficiency level of BPRS in Indonesia, see the impact of the pandemic on BPRS operations and compare the efficiency level of BPRS spread across Java and outside Java. This study uses a sample of 92 BPRS in Indonesia with an observation period from 2016 to 2021. This research method uses Data Envelopment Analysis (DEA) with secondary data sourced from the financial statements of each BPRS on the OJK official website. The input variables used include third-party funds, fixed assets and operating expenses. Meanwhile, the output variable consists of financing provided and operating income. The results showed that the average BPRS in Indonesia from the 2016-2021 period fluctuated. Then the CRS and VRS analysis found that BPRS outside Java were more efficient than BPRS spread across Java. Then, based on the trend analysis, the efficiency of BPRS in Indonesia has a fluctuating trend. Furthermore, in the efficiency analysis during the Covid-19 pandemic, there was a continuous decline in the efficiency level of the BPRS, although the decline that occurred was still small. This study also analyzes the potential improvement for program improvement that causes inefficiency of the input and output variables. And in general, the biggest cause of BPRS inefficiency comes from the output variable, namely the financing provided. This study also provides recommendations to BPR practitioners, regulators, and academics as a basis for decision making in achieving optimal efficiency and for further research

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“…As a result, the sustainability of the banking industry becomes unstable (Sholihah, 2021). The stability of the financial sector regulated by banks is crucial in ensuring good economic growth (Masrizal et al, 2022). In addition, as an intermediary institution for BPR in particular, they also experience obstacles in extending micro-credit to individuals and business entities due to the government's restrictive policy (Widiyaningtias & Dura, 2022).…”

Section: Introductionmentioning

confidence: 99%

Measuring the Efficiency Performance of Rural Banks in East Java during Covid-19

Aisyah As-Salafiyah

2023

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This research aims to analyze the efficiency level, source of efficiency, the potential for improvement needed, and comparison of the efficiency of BPR (Rural Bank) and BPRS (Islamic Rural Bank) in East Java. This research also looks at the efficiency of BPR and BPRS during the Covid-19 pandemic. The research period used in this study is from 2016-2021, with a research sample of 8 BPR and 6 BPRS in East Java. The analytical method used is a non-parametric approach, namely Data Envelopment Analysis (DEA), with secondary data sources originating from BPR and BPRS financial reports on the official OJK website. The study results show that the efficiency of BPR and BPRS during 2016-2021 has fluctuated yearly. BPR has higher efficiency than BPRS. Then in the efficiency analysis during the pandemic, the efficiency of BPR is relatively stable, even though there has been a decline in 2021. Meanwhile, BPRS showed a significant decline in 2021. Furthermore, based on the potential improvement analysis, the most significant cause of BPR inefficiency comes from input variables, namely fixed assets, and at BPRS is the financing provided. This research also provides recommendations to banks, regulators, and academics.

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Does economic freedom fosters Islamic rural banks efficiency? Evidence from Indonesia

Cited by 10 publications

References 74 publications

Efficiency Comparison between Conventional and Islamic Rural Banks in Sumatra during the COVID-19 Pandemic

Efficiency Comparison between Conventional and Islamic Rural Banks in Sumatra during the COVID-19 Pandemic

Non-parametric Efficiency of Islamic Rural Banks in Indonesia

Measuring the Efficiency Performance of Rural Banks in East Java during Covid-19

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