Indonesian Banking Efficiency: Transmission to the Financial Stability Confronting ASEAN Economic Community

Shochrul Rohmatul Ajija, Mohammad Zeqi Yasin, Reno Albra

DOI: https://doi.org/10.23917/jep.v18i2.5095

Abstract

Banks are a particular type of institution within the financial system that have influence on financial stability. Their readiness will determine the government’s policy, notably in an economic era of integration. In the case of South East Asia, there is the ASEAN Economic Community (AEC) which facilitates economic integration to strengthen allthe member countries. This study aims to measure bank efficiency (conventional and shariah) in Indonesia, and also establish the transmission scheme based on the estimated result through financial stability issues confronting the AEC. Data Envelopment Analysis (DEA) is used to estimate banking efficiency statically and dynamically (Malmquist Index). The result showed that technical efficiency of conventional banks is statically better than shariah banks. Meanwhile, dynamically, considering technological index, both types of banks have good results. The optimizing effort by each bank in order to increase their input utilization can be maintained through intensification of the financial program and making it more comprehensive. Subsequently, this effort hopefully can increase the number of financial participants. Eventually, increasing the number of participants will strengthen the financial stability of Indonesia.

Keywords

Banking; Efficiency; Financial Stability; AEC

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References

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Yadav, R., & Katib, M. N. (2015). Technical Efficiency of Malaysia’s Development Financial Institutions: Application of Two-Stage DEA Analysis. ASEAN Social Science, 11(16), 175-182.

Zeitun, R., & Benjelloun, H. (2013). The Efficiency of Banks and the Financial Crisis in a Developing Economy: The Case of Jordan. Journal of Finance, Accounting and Management, 4(1), 1-20.

Amirillah, A. (2014). Efisiensi Perbankan Syariah Di Indonesia. JEJAK : Jurnal Ekonomi dan Kebijakan, 7(2), 100-202.

Bank Indonesia. (2014, 1 21). Evaluasi Perekonomian 2013, Prospek 2014 dan Arah Kebijakan Bank Indonesia ke Depan.

Charnes., A., Cooper, W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2(6), 429-444.

Chu, S. F., & Lim, G. H. (1998). Share performance and profit efficiency of banks in an oligopolistic market: evidence from Singapore. Journal of Multinational Financial Management, 8, 155-168.

Damayanti, M., & Adam, L. (2015, 4). Program Kredit Usaha Rakyat (KUR) sebagai Alat Pendorong Pengembangan UMKM di Indonesia. Jakarta: Tim Nasional Percepatan Penanggulangan Kemiskinan (TNP2K).

Firdaus, M. F., & Hosen, M. N. (2013). Efisiensi Bank Umum Syariah Menggunakan Two-Stage Data Envelopment Analysis. Buletin Ekonomi Moneter dan Perbankan, 16(2), 167-190.

Gumilar, I., & Komariah, S. (2011). Pengukuran Efisiensi Kinerja dengan Metode Stochastic Frontier Approach Pada Perbankan Syariah. Jurnal Bisnis & Manajemen, 8(1), 1-134.

Havrylchyk, O. (2006). Efficiency of the Polish banking industry: Foreign versus domestic banks. Journal of Banking & Finance, 30, 1976-1996.

Hosen, M. N., & Rahmawati, R. (2017). Analisis Efisiensi, Profitabilitas dan Kesehatan Bank Umum Syariah Di Indonesia Periode 2010-2013. Jurnal Keuangan dan Perbankan, 16(2), 207-227.

Indrawati, Y. (2009). Analisis Efisiensi Bank Umum di Indonesia : Metode DEA. Bachelor Thesis, 1-74.

Ji, Y.-B., & Lee, C. (2010). Data Envelopment Analysis. The Stata Journal, 10(2), 267-280.

Johnes, J., Izzeldin, M., & Pappas, V. (2013). A comparison of performance of Islamic and conventional banks 2004–2009. Journal of Economic Behavior & Organization, 103, 93-107.

Klapper, L., & Zia, B. H. (2009, 1). Financial Stability and Access: The Importance of Financial Literacy. Worlbank Article.

Klapper, L., Lusardi, A., & Oudheusden, P. V. (2015). Financial Literacy Around The World. World Bank. Washington D.C.: World Bank.

Master Card Intelligent. (2015, April). Mastercard Financial Literacy Index Report (2014H1). Retrieved December 27, 2016, from http://www.masterintelligence.com/content/intelligence/en/research/reports/2015/mastercard-financial-literacy-index-report-2014h1.html.

Rahman, A. R., & Rosman, R. (2013). Efficiency of Islamic Banks: A Comparative Analysis of MENA and ASEAN Countries. Journal of Economic Cooperation and Development, 34(1), 63-92.

Rozzani, N., & Rahman, R. A. (2013). Determinants of Bank Efficiency: Conventional versus Islamic. International Journal of Business and Management, 8(14), 98-109.

Sesrtcic. (2000). Regional Economic Grouping of OIC Countries. Journal of Economic Cooperation, 21(2), 67-114.

Sillah, B. M., & Harrathi, N. (2015). Bank Efficiency Analysis: Islamic Banks versus Conventional Banks in the Gulf Cooperation Council Countries 2006 - 2012. International Journal of Financial Research, 6(4), 143-150.

Stewart, C., Matousek, R., & Nguyen, T. N. (2016). Efficiency in the Vietnamese banking system: A DEA double bootstrap approach. Research in International Business and Finance, 36, 96-111.

Surjaningsih, N., & Permono, B. P. (2014, Januari). Dinamika Total Factor Productivity Industri Besar dan Sedang di Indonesia. Buletin Ekonomi Moneter dan Perbankan, 277-308.

Sutawijaya, A., & Lestari, E. P. (2009). Efisiensi Teknik Perbankan di Indonesia Pascakrisis Ekonomi : Sebuah Studi Empiris Penerapan Model DEA. Jurnal Ekonomi Pembangunan, 10(1), 49-67.

Thangavelu, S. M., & Findlay, C. (2012). Bank Efficiency, Regulation and Response to Crisis of Financial Institutions in Selected ASEAN Countries. Real and Financial Integration in Asia, 2, 133.

Verico, K. (2015). Open-Ended Impact of AFTA on FDI Inflow : Evidence from Macrolevel Data Indonesia, Malaysia, Thailand, and Firm Level Data Indonesia. Journal of Economic Cooperation and Development, 36(2), 91-124.

Vinh, N. T. (2012). Evaluating the efficiency and productivity of Vietnamese commercial banks: A data envelopment analysis and Malmquist index. VNU Journal of Science: Economics and Business, 28(2), 103-114.

Wangke, H. (2014). Peluang Indonesia dalam Masyarakat Ekonomi ASEAN 2015. Info Singkat Hubungan Internasional, 6(10), 5-8.

Wasiaturrahma, & Ajija, S. R. (2017). Evaluating Financial Performance of Public Cooperatives for Women in East Java, Indonesia. American Scientific Publishers , 23, 8683–8689.

World Bank. (2016). Financial Sector. Retrieved December 7, 2016, from https://data.worldbank.org/topic/financial-sector.

Yadav, R., & Katib, M. N. (2015). Technical Efficiency of Malaysia’s Development Financial Institutions: Application of Two-Stage DEA Analysis. ASEAN Social Science, 11(16), 175-182.

Zeitun, R., & Benjelloun, H. (2013). The Efficiency of Banks and the Financial Crisis in a Developing Economy: The Case of Jordan. Journal of Finance, Accounting and Management, 4(1), 1-20.

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