EFFICIENCY OF ISLAMIC RURAL BANKS USING TWO-STAGE DATA ENVELOPMENT ANALYSIS APPROACH

Abstract

Islamic rural bank is required to operate effectively and efficiently in order to achieve maximum profit levels by minimizing costs incurred. West Java as one of the provinces with the highest number of rural banks must pay more attention to the level of efficiency in order to continue to develop and compete with other banking institutions. This study aims to determine the level of efficiency and the factors that affect the level of efficiency. The samples that will be used are 27 islamic rural bank in West Java. The results showed that during 2018 to 2021 the efficiency level of islamic rural bank in West Java was included in the category of still very likely to be optimized to be efficient. Inefficiency is caused by the lack of optimal utilization of third-party funds so that the level of output obtained is also less than optimal. Then the NPF ratio and KPMM has a negative and significant effect on the level of islamic rural bank efficiency, while the ROA ratio has a significant effect on the positive direction and the FDR ratio does not have a significant effect on the level of islamic rural bank efficiency in West Java. The implications of this study show that the efficiency of Islamic rural bank is closely related to the management and allocation of funds, especially third party funds and other assets as owned resources to operate.