ADVANCEMENT AND SETBACK IN ISLAMIC BANKING PRODUCTIVITY IN ASEAN: DO TECHNOLOGICAL CHANGES MATTER?

  • Aam Slamet Rusydiana Sharia Economic Applied Research & Training (SMART), Indonesia
  • Aisyah Assalafiyah Sharia Economic Applied Research & Training (SMART), Indonesia
Keywords: Productivity, Islamic banks, ASEAN.

Abstract

This study applies the Banker, Charnes and Cooper (BCC) model as a basic approach to the data envelopment analysis used to measure the level of productivity of 24 Islamic banks in four ASEAN countries (Indonesia, Malaysia, Brunei Darussalam and Thailand) over the 2010-2019 period. The Malmquist index was also employed, which is intended to accommodate improvements in efficiency, together with advancements in technology. According to the Malmquist index scores on total factor productivity (TFP) change, 17 of the 24 Islamic banks (or 70.8 percent) achieved an improvement in productivity over the research period, with Thailand recording the highest productivity level increase. Overall, the most productive Islamic bank was Affin Islamic Bank Berhad. Finally, it was observed that there was a productivity growth in the last two years of the period, namely 2017-2018 and 2018-2019. The productivity change was driven more by efficiency than by technology, implying that Islamic banks in ASEAN countries must improve this aspect.

References

Andriyani, L., Usman, N., & Pambuko, Z. B. (2020). Antecedents of social funds' productivity of Islamic Banks in Indonesia. Humanities and Social Sciences Reviews, 8(2), 488–494. https://doi.org/10.18510/hssr.2020.8256.

Ascarya, A., & Yumanita, D. (2008). Comparing the efficiency of Islamic banks in Malaysia and Indonesia. Bulletin of Monetary Economics and Banking, 11(2), 95-119. https://doi.org/10.21098/bemp.v11i2.237.

Banker, R. D., Charnes, A., & Cooper, W. W. (1984). Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management Science, 30(9), 1078-1092.

Bjurek, H. (1996). The Malmquist total factor productivity index. The Scandinavian Journal of Economics, 98(2), 303-313.

Burns, A. F., & Mitchell, W.C. (1946). Measuring business cycles, Vol. 2. New York: National Bureau of Economic Research.

Caves, D. W., Christensen, L. R., & Diewert, W. E. (1982). The economic theory of index numbers and the measurement of input, output, and productivity. Econometrica: Journal of the Econometric Society, 50(6), 1393-1414.

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

Färe, R., Grosskopf, S., Lindgren, B., & Roos, P. (1992). Productivity changes in Swedish pharmacies 1980–1989: A non-parametric Malmquist approach. Journal of Productivity Analysis, 3(1-2), 85-101.

Färe, R., Grosskopf, S., Norris, M., & Zhang, Z. (1994). Productivity growth, technical progress, and efficiency change in industrialized countries. The American Economic Review, 84(1), 66-83.

GIFR (2019). Global Islamic Finance Report 2019.

Hadad, M. D., Hall, M. J. B., Kenjegaliev, K. A., Santoso, W., & Simper, R. (2011). Productivity changes and risk management in Indonesian banking: A Malmquist analysis. Applied Financial Economics, 21(12), 847–861. https://doi.org/10.1080/09603107.2010.537636.

Johnes, J., Izzeldin, M., Pappas, V., & Alexakis, C. (2019). Performance and productivity in Islamic and conventional banks: Evidence from the global financial crisis. Economic Modelling, 79, 1–14. https://doi.org/10.1016/j.econmod.2018.09.030.

Jubilee, R. V. W., Kamarudin, F., Latiff, A. R. A., Hussain, H. I., & Tan, K. M. (2021). Do Islamic versus conventional banks progress or regress in productivity level?. Future Business Journal, 7(1), 1-22.

Kamarudin, F., Hue, C. Z., Sufian, F., & Mohamad Anwar, N. A. (2017). Does productivity of Islamic banks endure progress or regress? Empirical evidence using data envelopment analysis based Malmquist Productivity Index. Humanomics, 33(1), 84-118. https://doi.org/10.1108/H-08-2016-0059.

Kamarudin, F., Mohamad Anwar, N. A., Md. Nassir, A., Sufian, F., Tan, K. M., & Iqbal Hussain, H. (2020). Does country governance and bank productivity Nexus matters? Journal of Islamic Marketing (ahead-of-print). https://doi.org/10.1108/JIMA-05-2019-0109.

Nugrohowati, R. N. I., Fakhrunnas, F., & Haron, R. (2020). Examining technological and productivity change in the islamic banking industry. Pertanika Journal of Social Sciences and Humanities, 28(4), 3355-3374. https://doi.org/10.47836/pjssh.28.4.47.

Omar, M. A., Abd. Majid, M. S., & Rulindo, R. (2007). Efficiency and productivity performance of the national private banks in Indonesia. Gadjah Mada International Journal of Business, 9(1), 1-18.

Otaviya, S. A., & Rani, L. N. (2020). Productivity and determinant of Islamic banks evidence from Indonesia. Journal of Islamic Monetary Economics and Finance, 6(1), 189–212. https://doi.org/10.21098/jimf.v6i1.1146.

Ozcan, Y. (2008). Health care benchmarking and performance evaluation: An assessment using data envelopment analysis. Boston: Springer.

Rahim, A., Rahman, A., & Rosman, R. (2013). Efficiency of Islamic banks: A comparative analysis of MENA and Asian countries. Journal of Economic Cooperation and Development, 34(1), 63–92.

Rani, L. N., Sukmaningrum, P. S., & Salleh, M. C. M. (2020). A comparative analysis of the productivity of Islamic banking in Indonesia, Malaysia and Brunei Darussalam during the period 2012-2017. International Journal of Innovation, Creativity and Change, 11(11), 470–491.

Refinitiv, & Islamic Corporation for the Development of the Private Sector. (2020). Islamic Finance Development Report 2020.

Rusydiana, A. S., & Marlina, L. (2019). Financial and social efficiency on indonesian Islamic banks. Journal of Islamic Monetary Economics and Finance, 5(3), 579-602.

Sharma, D., Sharma, A. K., & Barua, M. K. (2013). Efficiency and productivity of banking sector: A critical analysis of literature and design of conceptual model. Qualitative Research in Financial Markets, 5(2), 1755-4179.

Solihin, S., Achsani, N. A., & Saptono, I. T. (2016). The Islamic banking and the economic integration in ASEAN. Bulletin of Monetary Economics and Banking, 19(1), 81–106. https://doi.org/10.21098/bemp.v19i1.601.

Sufian, F. (2007). Malmquist Indices of productivity change in Malaysian Islamic banking industry: Foreign versus domestic banks. Journal of Economic Cooperation, 28(1), 115–150. https://doi.org/10.1007/BF02294970.

Sufian, F. (2010). Productivity, technology and efficiency of de Novo Islamic banks: Empirical evidence from Malaysia. Journal of Financial Services Marketing, 15(3), 241–258. https://doi.org/10.1057/fsm.2010.20.

Usman, N., Andriyani, L., & Pambuko, Z. B. (2019). Productivity of Islamic banks in Indonesia: Social funds versus financial funds. Journal of Asian Finance, Economics and Business, 6(3), 115–122.

Wanke, P., Hassan, M. K., & Gavião, L. O. (2017). Islamic banking and performance in the ASEAN banking industry: A topsis approach with probabilistic weights. International Journal of Business and Society, 18(S1), 129–150.

Yulita, I., & Rizal, S. (2016). Islamic banking efficiency: Comparative studies between Malaysia and Indonesia. Signifikan: Jurnal Ilmu Ekonomi, 5(1), 31–50. https://doi.org/10.15408/sjie.v5i1.3129.

Published
2021-08-31
How to Cite
Rusydiana, A., & Assalafiyah, A. (2021). ADVANCEMENT AND SETBACK IN ISLAMIC BANKING PRODUCTIVITY IN ASEAN: DO TECHNOLOGICAL CHANGES MATTER?. Journal of Islamic Monetary Economics and Finance, 7(3). https://doi.org/10.21098/jimf.v7i3.1322
Section
Articles