Efficiency, Asset Quality and Stability: Comparative Study of Conventional Banks and Islamic Banks in Southeast Asia

Abstract

This study aims to analyze the differences in efficiency, asset quality, and stability in Islamic banks (Ib) and conventional banks (Cb) in Southeast Asia. To measure the efficiency, it uses DEA analyzing of input and output of Ib and Cb, namely input (total deposits, personnel expense, and fixed assets) and output (loans and non-interest income). Then, to test the quality of assets, this study uses Loan Loss provisions and Loan Loss Reserve. The stability is measured by calculating the Z-Score. This study aims to look at the level of efficiency, asset quality and stability in Islamic banks and conventional banks. Furthermore, this study investigates the differences of those factors to see the extent of which Islamic banks can compete with conventional banks in the Southeast Asia context. The population in this study are conventional banks and Islamic banks in Southeast Asia, namely Indonesia, Malaysia, Brunei Darussalam, the Philippines and Thailand. The type of data is secondary data obtained by Annual Report of each bank. There were 31 conventional banks and 17 Islamic banks, years 2013-2017, in Southeast Asia included in this study. The results showed that there were differences in efficiency, asset quality and stability between conventional banks and Islamic banks. Islamic banks were more efficient than conventional banks. Whereas conventional banks were better in terms of Asset quality and stability compared to Islamic banks.

Technical Efficiency and Intellectual Capital Islamic Banks in Indonesia

“…Recent studies indicate that the efficiency of Islamic banks in Asian countries has been on the rise (Chowdhury & Haron, 2021;Mala et al, 2020;Nailah & Rusydiana, 2020;Safiullah, 2021;Serly & Handayani, 2020;Solihin et al, 2016). Data Envelopment Analysis results show that Islamic banks in Thailand and Malaysia consistently rank as highly efficient.…”