Islamic bank vs conventional bank in Indonesian rural feild, An Analysis on Financial Performances
Jihad (a*), Siti Zulaikha (b)
a) Faculty of Economy and Business, Airlangga University
Jl. Airlangga 4-6, Surabaya Indoesia 60285
*jihadhudam[at]gmail.com
b)Faculty of Economy and Business, Airlangga University
Jl. Airlangga 4-6, Surabaya Indoesia 60285
Abstract
Islamic banks in Indonesia have been in existence for more than twenty years. Indonesia has a unique type of banking with a special segmentation of micro small and Medium Enterprises we call it rural banks, where not all countries have it. With a very large number reaching 1,593 conventional bank and 165 islamic bank. This paper aims to describe and critically evaluate and compare the financial performance of Islamic rural banks to that of conventional rural banks. Three aspect are Profitability, Liquidity and Financing quality for Islamic and conventional banks are examined. The analysis of monthly data covers the period from January 2009 to Desmber 2018 (120 observations). Paired sampled t-test was adopted to see whether there are significant differences in the financial ratios between both banks. This study found that on profitability and financing quality aspect conventional rural banks are significantly higher than that of Islamic rural banks, but not on liqudity aspect. Based on that result the findings suggest that Islamic banks need to mantain their financing quality to get higher profit. Conventional banks need to push financing to support the real sector as that of Islamic banks.
Keywords: rural Islamic banks; rural conventional banks; financial performances
Topic: Islamic Micro finance