THE PROFIT EFFICIENCY: EVIDENCE FROM ISLAMIC BANKS IN INDONESIA

This study investigates the profit efficiency of Indonesia Islamic banks during the period 2011 to 2014. The sample comprised of 11 domestic and foreign Islamic banks. We employ non parametric Data Envelopment Analysis method to compute the profit efficiency levels, through of intermediation approach. Furthermore, this study considering input and output oriented measures. Deposits, labour cost and fixed assets are taken as an input variable while output variables are price of profit operation. We find that only three Islamic banks which have been full profit-efficient, while another eight Islamic banks are classified as profit-inefficient. The finding of this study are expected to contribute significantly to the existing knowledge on the operating performance of Islamic banks, Islamic bank’s management, and decision-making for regulators of Islamic banks in Indonesia.