Indonesian Islamic banks: A review of the financial state before and after the COVID-19 pandemic

Abstract

Banking plays an important role in business and economic growth. However, since a couple decades ago, there have been issues with eiciency and performance. his paper aims to examine Indonesia’s Islamic banking performance through non-parametric production eiciency analysis before and ater the COVID-19 pandemic, 2010–2021. his study diferentiated between diferent dimensions of Indonesia’s Islamic banks (IIB) inance and non-inance aspects, as well as investigated the relationships between these dimensions of inance, including assets, deposits, equity, inancing, and income, and non-inancial variables, namely employees and oices. Non-parametric analysis, with the input-oriented variable constant return to scale (CRS) and returns to scale (VRS) models as a framework, data envelopment analysis (DEA) is used to calculate the IIB of overall, pure, and scale eiciency. However, the resources of technology IIB management are lacking, as well as macroeconomic and environmental efects. his study found that IIB operational needs to enhance investment in technology beyond the oice. his means that the number of oices has a smaller impact on enhancing deposits and revenue. Technology investment has a crucial role in enhancing IIB equity, income, and innovation service. As a result, IIB managers and policymakers must improve their eiciency scores in order to increase competition and innovation. Furthermore, IIB needs to increase and spend their assets and experience to enhance technology, which signiicantly afects eiciency.