Efficiency and Stability of Islamic Banking in Asean: Dea Window Analysis

Abstract

The study aims to analyze stability and efficiency of the Islamic banking industry in the Association of Southeast Asian Nations (ASEAN) region. Islamic banks are currently in the spotlight for their role in Islamic financial growth across South East Asia, especially in Indonesia. The efficiency and stability of Islamic banking is one factor in measuring the readiness of Islamic banks within the ASEAN Economic Community (AEC) framework. This research examines 12 Islamic banks in Indonesia, Malaysia, Brunei Darussalam and Thailand during the 2013-2018 period. The analysis was conducted with a non-parametric approach, namely DEA Window Analysis (DEWA). The results show that Malaysia has the highest average efficiency in four different periods with 96% and Indonesia has an average efficiency of 67%. Thailand with an average efficiency that is relatively stable at 100% and Brunei Darussalam's average efficiency is 55%, lower compared to other countries. For Islamic banks with good stability conditions are Bank Islam Malaysia Berhad and Islamic Bank of Thailand. Meanwhile, Islamic banks with unstable condition are Bank Mega Syariah and Bank Islam Brunei Darussalam. Overall, Islamic banks in ASEAN have achieved stable performance, even though most of them are still inefficient.

Fiscal policy and sukuk market development in OIC countries

“…This implies that higher fiscal deficits reduce fiscal space thereby constraining the development of sukuk market. This finding is confirmed by Al Parisi and Rusydiana (2016) who found a negative relationship between budget deficit and sukuk issuance. On the other hand, Amaliah and Aspiranti (2017) found positive relationship between fiscal deficit and sovereign sukuk market development.…”

“…Khudari (2017) found significant positive relationship between inflation rate and international sukuk . In the case of Al Parisi and Rusydiana (2016), the results of two-stage least square showed simultaneous relationship between budget deficit and sukuk issuance. Sukuk have significant negative effect on budget deficit and budget deficit has significant negative relationship with sukuk issuance.…”

Dea Window Analysis for Indonesian Islamic Banks’ Efficiency

“…These measures are used to capture the stability efficiency of each DMU. The lower the level of these four values , the more stable the efficiency obtained (Nailah & Rusydiana, 2020).…”

“…Furthermore, Bitar, Pukthuanthong, and Walker (2019) examined the role of capital and liquidity levels and their effect on the efficiency of Islamic banks during the 2008-2009 financial crisis using DEA and quantile regression. In the context of ASEAN Islamic banking, Nailah and Rusydiana (2020) recently investigated aspects of efficiency and stability using DEWA. Rusydiana and Marlina (2019) explored the financial and social efficiency of Indonesian Islamic banks using the DEA and Free Disposal Hull (FDH) methods.…”

Zakat Policy and Regulation

“…The advancement of technology, particularly in finance, is one type of innovation that can be maximized to make zakat collecting easier (Nailah & Rusydiana, 2020). Numerous zakat organizations throughout the world have pioneered the development of online platforms with mobile applications, one of which being the Indonesian zakat institution, BAZNAS (Hudaefi et al, 2019).…”