ISLAMIC BANK EFFICIENCY: EMPIRICAL EVIDENCE FROM OIC COUNTRIES IN ASIA

Taufiq Taufiq, Razali Razali

Abstract


ABSTRACT - This research examines the determinants of Islamic bank efficiency by adding financial inclusion as a proposed new variable. We use two efficiency measures, namely operational efficiency and cost efficiency. This research uses samples from seven Organization of The Islamic Cooperation (OIC) countries in the Asian region during the period from quarter 3 of 2018 to quarter 1 of 2023. Using panel data regression with a random effect model (GLS), operational efficiency is positively influenced by capital adequacy, loans, profitability, and bank size. Meanwhile, operational efficiency is negatively influenced by financial inclusion and banking risk. Cost efficiency is positively influenced by factors such as capital adequacy, financial inclusion, loans, and bank size. Meanwhile, cost efficiency is negatively influenced by banking risk. It is hoped that these findings will have implications for the relevant authorities to increase the efficiency of Sharia banking in their countries in addition to establishing regulations related to capital. Therefore, there needs to be proper attention given to the impact of financial inefficiencies associated with increasing financial inclusion in Islamic banks.


Keywords


Efficiency, CAR, Financial Inclusion, Loan, Risk, Profitability, Bank Size

References


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