Comparative Study of Financial Performance of Islamic Banks and Conventional Banks in Indonesia

Abstract

The presence of Islamic banks with the concept of profit sharing has created new competition in the national banking business. Since its inception, Islamic banks have been required to improve their performance to compete with conventional banks, which have long dominated the market share. This study aims to compare Islamic and conventional banks' financial performance in Indonesia for the 2016-2020 period. The research method used is comparative research with a quantitative approach. The research sample consisted of Islamic and conventional banks, each taken by the five largest banks based on asset value. Samples were taken using a purposive sampling technique. Data collection techniques using documentation. The data type used is secondary data in the form of financial ratio reports obtained through the official OJK website. Data analysis techniques used descriptive and comparative analysis in the form of independent sample t-test and Mann-Whitney test. The results of this study indicate that Islamic banks have better performance than conventional banks in terms of the CAR ratio. However, when viewed from the ratio of NPL/NPF, ROA, NIM/NOM, BOPO, and LDR/FDR, Conventional Banks have a better performance. Based on the results of the different tests, it was found that there was no significant difference between the performance of Islamic banks and conventional banks when viewed from the CAR ratio. However, when viewed from the ratios of NPL/NPF, ROA, NIM/NOM, BOPO, and LDR, there are significant differences between the financial performance of Islamic and conventional banks.