TY - JOUR
T1 - An Analysis of the Performance of Regional Development Banks (RDB) in Indonesia
T2 - Stochastic Frontier Analysis Approach
AU - Satyagraha, Ferdian Timur
AU - Purwono, Rudi
AU - Sari, Dyah Wulan
N1 - Funding Information:
Intermediary performance of RDBs observed from the loan-to-deposit ratio (LDR) tends to record a lower score compared to the national banking industry. Non-performing loans of RDBs tend to be higher than the national banking industry. While the capital performance of RDBs observed from the capital adequacy ratio (CAR) is considered adequate, it is still too low to support business expansion and increase RBD’s competitiveness in the national financial industry. This statement is also supported by (). They state that each bank must have a minimum amount of capital to fulfill its basic functions, namely: first, as a reserve fund in the event of financial and operational losses; second, as the funds needed to regulate and operate a financial company before other sources of funds are raised; third, as a strength and guarantee to the community that the bank has sufficient capital as a financial institution; fourth, by having sufficient capital, banks can develop new supporting services and facilities; and fifth, capital serves as a growth manager and helps ensure that growth is sustainable over the long term. Based on the function of bank capital, the more capital the better the bank’s growth, even though the bank’s capital has exceeded the rules set by the authorities or by the central bank.
Publisher Copyright:
© 2022 by the authors.
PY - 2022/9
Y1 - 2022/9
N2 - The dominance of the banking sector shows that the banking industry plays an important role in driving the economy in Indonesia. As part of the national banking industry, Regional Development Banks (RDB) are required to contribute to the economy through optimal performance. One of the important indicators in measuring company performance, including in the banking industry, is the level of efficiency. Efficiency in the banking industry can be observed from a micro and macro perspective, which leads to the ability of banks to survive in conditions of increasingly fierce competition in technology-based products and services, as well as the ability of banks to allocate financial resources to increase investment activities that can stimulate the economy. Therefore, this study examined the level of cost and profit efficiency of the RDB industry in Indonesia for the 2011–2020 period, as well as the internal and external variables that affect RDB inefficiency using Stochastic Frontier Analysis (SFA). The results show that there are no RDB’s efficient in cost and profit. Furthermore, the variables capital adequacy ratio and technology investment impact on increasing cost and profit efficiency, opposite with non-performing loan. Therefore, to optimize the xRDB’s cost and profit efficiency, the main thing that must be done includes managing and improving good quality loans as well as optimizing idle funds.
AB - The dominance of the banking sector shows that the banking industry plays an important role in driving the economy in Indonesia. As part of the national banking industry, Regional Development Banks (RDB) are required to contribute to the economy through optimal performance. One of the important indicators in measuring company performance, including in the banking industry, is the level of efficiency. Efficiency in the banking industry can be observed from a micro and macro perspective, which leads to the ability of banks to survive in conditions of increasingly fierce competition in technology-based products and services, as well as the ability of banks to allocate financial resources to increase investment activities that can stimulate the economy. Therefore, this study examined the level of cost and profit efficiency of the RDB industry in Indonesia for the 2011–2020 period, as well as the internal and external variables that affect RDB inefficiency using Stochastic Frontier Analysis (SFA). The results show that there are no RDB’s efficient in cost and profit. Furthermore, the variables capital adequacy ratio and technology investment impact on increasing cost and profit efficiency, opposite with non-performing loan. Therefore, to optimize the xRDB’s cost and profit efficiency, the main thing that must be done includes managing and improving good quality loans as well as optimizing idle funds.
KW - Regional Development Bank (RDB)
KW - SFA
KW - cost efficiency
KW - profit efficiency
UR - http://www.scopus.com/inward/record.url?scp=85138578076&partnerID=8YFLogxK
U2 - 10.3390/economies10090228
DO - 10.3390/economies10090228
M3 - Article
AN - SCOPUS:85138578076
SN - 2227-7099
VL - 10
JO - Economies
JF - Economies
IS - 9
M1 - 228
ER -