Stochastic Frontier Analysis – Sharia Banks and Conventional Banks Efficiency during Covid-19 Pandemic

Dini Dewindaru, ermina sari

Abstract


Purpose - The purpose of this study is to analyze the level of SB and CB efficiency during the COVID-19 pandemic, examine the differences in efficiency between SB and BU during the pandemic, and examine input and output components that affect the efficacy of SB and BU during the COVID-19 pandemic.

Method - This study uses the Stochastic Frontier Analysis method to analyze the bank's efficiency threshold and the independent sample t-test to determine the difference in the efficiency threshold between SB and CB. The study's focus is on the number of Bank Umum Syariah (SB) and Bank Umum Konvensional (CB) branches that operate in Indonesia between 2020 and 2022. Purposive sampling was used in this study's sample selection process, yielding 9 SB and 39 CB.

Result  -  The findings indicated that during the COVID-19 pandemic, conventional banks had lower efficiency levels as compared to Islamic banks. The national banking industry's efficiency, whether it be in conventional banking or Islamic banking, suffered a decline during the COVID-19 pandemic; however, the percentage of Islamic banks that experienced a decline was higher than that of conventional banks.

Implication – As a regulator, BI can provide stimulation to the banking sector so that it can overcome the impact of the currency crisis and continue to operate efficiently. In addition, this study can be used as a chance to identify and correct specific flaws in the Islamic banking model so that it has the same strength as a conventional bank.

Originality - The previous study focused on the comparison with conventional banks, then this study aims to address the effect of the global currency crisis caused by the Covid-19 pandemic on bank resilience to such a crisis.


Keywords


Sharia_Banks_Efficiency; Stochastic_Frontier_Approach; Sharia_Banks; Islamic_Banks; Profit

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