The Impact of Pandemic on Indonesian Conventional and Shariah Bank's Performance

Abstract

The Covid-19 pandemic caused the government to implement a similar policy to lockdown called Large-Scale Social Restrictions. The policy was implemented in several regions in Indonesia and impacted the declining economy of the community, including in the banking sector. This study aims to analyze whether there are differences in the bank's asset quality measured by non-performing loans and the bank of profitability measured by return on assets and net interest income or margin. We also evaluate whether banks' specific factors could explain those changes. Banks specific factors in this research are operating cost, capital adequacy, and type as conventional or shariah banks. The research model was controlled by banks size as measured with the natural logarithm of banks' total assets. The data used in this study are commercial and sharia banks whose financial statements in the second quarter of 2020 are available on the OJK website. Based on the purposive sampling method with the criteria, the sample is feasible to use as many as 77 banks, consisting of 66 conventional banks and 11 shariah banks. The types of data used are secondary and cross-section data. The analytical techniques used are dependent two variables and multiple linear regression. The results showed a significant change in banks' assets quality and probability during the pandemic. However, there is not enough evidence to conclude that the decrease in assets quality and banks profitability comes from banks specific factors, despite a significant difference in banks' interest margin between conventional banks and shariah banks. Conventional bank shows a significant negative decrease in NIM compared to shariah bank after the covid period.