Resilience of Sharia Banking Efficiency in Times of Crisis

Abstract

This study examines the operational efficiency of Sharia banking and conventional banking in Indonesia during the global pandemic crisis, to find which have withstood the real sector crisis intensity better. The method used is comparison of multiple regressions across categories of sharia and conventional banks according to OJK. The key variables used are operating expense ratio for efficiency and covid cases and deaths to measure intensity of the crisis. Pandemic crisis intensity significantly the efficiency of sharia banking, especially in BUKU 2 category, although not for larger sharia banks in BUKU 3 or any conventional banks. Smaller sharia banks should start improving their risk management, especially in optimizing their operational cost, in order to be more resilient in facing unexpected external real sector crisis. Financial regulators might need to implement more specialized capital policies for Sharia banks during crises. This study doesn’t only compare efficiency of sharia and conventional banks in general, but also through BUKU categories.