Financial Efficiency of Islamic Rural Banks in Indonesia: A Two-Stage DEA Approach

Wartoyo, Wartoyo and Moh. Mabruri, Faozi and Abdul, Ghoni and Mohammad, Iqbal and Shainima, Islam (2025) Financial Efficiency of Islamic Rural Banks in Indonesia: A Two-Stage DEA Approach. Conscientia Beam, Pakistan.

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Abstract

This study examines the financial efficiency of Islamic Rural Banks (BPRS) in West Java, Indonesia, by using a two-stage Data Envelopment Analysis (DEA) framework grounded in Financial Intermediation Theory. The first stage measures efficiency through multiple inputs operating expenses, fixed assets and inventory, total deposits, and total assets and outputs, profit-sharing financing, receivables, fund distribution income, and other operating income. The second stage applies Tobit regression to evaluate the effects of key financial ratios: Non-Performing Financing (NPF), Return on Assets (ROA), Operating Expenses to Operating Income Ratio (BOPO), and Financing to Deposit Ratio (FDR) on efficiency scores. Findings indicate that 7 of 10 BPRS consistently achieved optimal efficiency (DEA score = 1.00), while 3 institutions experienced persistent inefficiencies across various inputs and outputs. Tobit analysis shows that ROA, BOPO, and FDR have significant positive effects on efficiency, whereas NPF is not statistically significant. The results underscore the critical role of cost control and effective fund intermediation in improving performance. The study advances the application of Financial Intermediation Theory in Sharia-compliant rural banking by integrating ethical considerations into technical efficiency measurement. Limitations include geographic focus, data quality variability, and exclusion of qualitative performance measures.

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Item Type:	Other
Subjects:	H Social Sciences > HA Statistics H Social Sciences > HG Finance
Divisions:	Karya Ilmiah
Depositing User:	wartoyo
Date Deposited:	11 Sep 2025 03:26
Last Modified:	11 Sep 2025 03:27
URI:	http://repository.syekhnurjati.ac.id/id/eprint/17319

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