COMPARATIVE ANALYSIS OF THE EFFICIENCY OF ISLAMIC BANKING IN INDONESIA BEFORE AND DURING COVID-19 PANDEMIC

Abstract

In 2019, COVID-19 starts to become a global emergence and keeps spreading all over the world. It has begun to enter Indonesia in February 2020 and has developed the social restriction and lockdown policy that leads to the decline in the economy. In contrast, the Islamic banking industry has escalated marginally in the past century. As a business entity, Islamic Banking has to maintain its business performance, one of which is by measuring the efficiency of the bank. The aim of this study is to analyse whether the Islamic Banking industry is disrupted by the occurrence of the COVID-19 pandemic, by measuring the efficiency of Islamic Banking. This study uses the Data Envelopment Analysis method with Variable Return to Scale model in output orientation. The variables used are based on the Intermediation approach which are Third Party Funds with Total Assets for the input, and Financing with Operating Income for the output. The samples are from all of the Islamic Banks in Indonesia in 2019-2021 except PT Bank Net Indonesia Syariah (total of 13). After calculating the efficiency, to see whether there is a difference between the Islamic Banks' efficiency before and during the COVID-19 pandemic, the Kolmogorov-Smirnov and Mann-Whitney U Test are used. The result of this study is that the Islamic banks in Indonesia have not been efficient both before and during the COVID-19 Pandemic, with a score of 68,12% for before and 69,64% for during pandemic. Moreover, the correlation analysis using the Mann-Whitney U test result indicates that the efficiency score before and during the COVID-19 pandemic has no significant difference. Hence, this illustrates that the occurrence of the COVID-19 pandemic didn’t affect the Islamic Banking industry in Indonesia, particularly on their efficiency.