Analysis of Islamic Banking Growth in Indonesia

Aya Ramadhani Toba, H Arson Aliludin

Abstract


The purpose of this research is to analyse and forecasting the growth of Islamic bank in Indonesia. Islamic bank or better known by the name of Bank Syariah stepped in Indonesia market in 1991, and in 2014 Indonesia has 11 Islamic Banks and 24 Islamic Business Units. The chance of Islamic bank become popular is really big with the reason of Indonesia’s citizen are majorly have Islam as religion. Roughly 88% of Indonesia's population is Muslim. Despite the opportunity, Islamic Bank growth is slowing down in past years and its target to reach 5% market share in 2008 can be reach until now, even after 23 years in bank industry. The study supported by collection of annual report of conventional bank and Islamic bank in Indonesia from 2004 – 2014. The study used camel analysis to determine the performance of Islamic Bank from capital, asset, management, earning, and liquidity perspective. Time Series Analysis also implied to forecasting the performance and market share of Islamic Banks in the coming years. Overall performance of Islamic bank analysed by CAMEL ratio shows that Islamic bank already follow the regulation made by Bank Indonesia except in earnings when Islamic bank performed below ROA standard given by Bank Indonesia in 2014. But compare to conventional bank, Islamic bank still a little bit lack to compete with conventional bank performance and need an improvement to increase the growth of earnings and third-party of fund in market share.

Aus. J. Isla. Finan. & Busi. Vol 2(1), April 2016, P 36-55


Keywords


Islamic Banking; CAMEL Ratio Analysis; Time Series Analysis; Bank Growth; Bank Performance; Market Share

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