Efficiency Analysis of Five Conventional Commercial Banks in Indonesia by Examining the Principles of Sustainable Finance

Abstract

This research analyzes the efficiency of conventional commercial banks in Indonesia by examining the principles of sustainable finance. This research only examines 5 banks in Indonesia during 2019-2021 due to the availability of data obtained from the sustainability report. The efficiency scores in 2019-2021 will be calculated using the DEA method with an output-oriented Bankers-Charnes-Cooper (BCC) assumption or Variable Return to Scale (VRS) assumption and an intermediation approach. Third-party funds, other operating expenses, and energy efficiency are input variables used in this research. Credit and securities are the output variables. In general, the results of this research conclude that several banks in Indonesia have a DEA efficiency score equal to 1 or have worked efficiently and the bank that always works efficiently during 2019-2021 is BCA. The practical implications to improve bank efficiency for banks that are not yet efficient are to maximize the distribution of funds through credit and securities, then these banks also need to take advantage of technological advances.