Efficiency of Fund Management of Sharia Banking in Indonesia (Based On Parametric Approach)

Abstract

The high level of competition among Islamic banks is required the bank to keep manage existing funds more efficiently. Currently, the competition among Islamic banks back to the level of price competition (margin profit sharing), where the rate of profit sharing is slightly difference, thus efficiency of fund management is required. The aim of this study is to know the level of cost efficiency among Islamic Banks (BUS) in Indonesia, in this case, Bank Muamalat Indonesia (BMI), Bank Syariah Mandiri (BSM) and Bank Syariah Mega (BSM) are investigated during the study period of January 2008 to September 2010 using parametric approach namely Stochastic Frontier Approach (SFA). The results show that the Bank Muamalat Indonesia is the greatest level of cost efficiency among Islamic Banks in Indonesia. The factors which influence the input and output level of cost efficiency of each Islamic Banks are; the effect on BMI is the sharing expenses, BSM is cost-sharing expenses, personnel expenses and total financing and BMS is personnel expenses, total financing, and securities which owned.

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