COMPARING DETERMINANT OF PROFITABILITY BETWEEN ISLAMIC BANKS AND CONVENTIONAL BANKS IN INDONESIA (CASE STUDY: EIGHT ISLAMIC BANKS AND EIGHT CONVENTIONAL BANKS IN INDONESIA PERIOD 2010-2013)

• Main Author: Herdiana, Dita
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/72266
• Institution: Institut Teknologi Bandung

The expansion of Islamic banks has been started from 1980’s and 1990’s around the world. Islamic banking is one of the developing industries that become more important for Indonesia’s economy growth that have gained market shares in Indonesia domestic area and became favorable in shareholders and creditors perspective. This research uses quarterly bank’s financial report from July 2010 until September 2013 from 8 Islamic banks and 8 conventional banks. The sample selections from Islamic banks are 3 non foreign exchange banks and 5 foreign exchange banks; and, the sample from conventional banks are 1 non foreign exchange bank, 2 state owned banks and 5 foreign exchange banks. This research used multiple regression method as analysis statistic tools to determine which factors affect each dependent variable. The dependent variables are Return on Asset (ROA), Return on Equity (ROE) and Net Interest Margin (NIM). The independent variables from Islamic banks are IB wadiah demand deposit, IB wadiah saving deposit, IB mudharaba saving deposit, IB total saving deposit, IB mudharaba time deposit and IB total depositors funds, mudharaba receivable, placement in Bank Indonesia, placement in other banks, security in investment, then small enterprise credit, non-small enterprise credit, property credit, non-property credit, quick ratio and core depositors to depositors funds ratio. The independent variables for conventional banks are demand deposit, saving deposit, time deposit, cash, placement in Bank Indonesia, placement in other banks, security in investment, small enterprise credit, non-small enterprise credit, and restructured credit property credit. The result showed the independent variables that significantly affects ROA is IB wadiah demand deposit for Islamic banks and demand deposit for conventional banks; the independent variables that significant variable with ROE is IB wadiah demand deposit for Islamic banks and demand deposit for conventional banks; and the independent variables that significant variable with NIM is IB mudharaba time deposit for Islamic banks and time deposit for conventional banks. This research shows depositors’ funds have significant effect for ROA, ROE and NIM. Based on the results, this research has several suggestions to improve bank’s profitability performance. The regulator and banks managers need to synergize to improve profitability banks and to increase competitiveness to create more economic growth. Banks must maintain its stability and its amount of investment in generating income but should refer to regulation. Depositor trustiness is also maintained to make good long term relationship. The other suggestion is banks (both Islamic bank and conventional bank) can make various items of deposit product. Depositors’ funds are the main transaction of bank. By getting more funds, It usually spending more promotional cost. Bank should have the allocated funds to avoid excessive or unimportant cost.