Can the Islamic Banks be Efficient? A Data Envelopment Analysis (DEA) in Indonesia

There have been doubts and critiques over the existence of Islamic banks and whether they can function efficiently given their distinctive characteristics. Hence more studies are needed to examine the Islamic banks' efficiency. Using the Data Envelopment Analysis (DEA) technique, this study evaluates the efficiency of Islamic banks in Indonesia from 2018 to 2020. Sample of 14 Islamic banks in Indonesia was utilized resulting the total 42 observations for analysis. Data were acquired from financial statements on the Indonesia Stock Exchange's official website. The findings reveal that most of the Islamic banks in Indonesia were highly efficient in the three years period of study. The 14 Islamic banks during 2018 to 2020 were laid in category very efficient and efficient, wherein, on average, all Islamic banks in Indonesia were at an efficient level. The findings implies a positive overall performance of Islamic banks in terms of its efficiency hence investors and stakeholders may have greater confidence in the Islamic banks. This also indicates the promising future for the further development of Islamic banks.