COMPARATIVE STUDY OF EFFICIENCY AND PRODUCTIVITY BETWEEN CONVENTIONAL COMMERCIAL BANKS AND ISLAMIC COMMERCIAL BANKS: EVIDENCE FROM INDONESIA

This study aims to analyze and compare the efficiency and productivity of Conventional Commercial Banks (BUK) and Islamic Commercial Banks (BUS) in Indonesia, with 19 BUK and 14 BUS in Indonesia. This study uses the CRS and VRS models in analyzing efficiency with Data Envelopment Analysis while analyzing productivity using the VRS model using the Malmquist Productivity Index. The results of this study indicate that there are still BUK and BUS bankers who have not achieved maximum efficiency, and there are still many of the two types of banks with low efficiency. The leading cause of the inefficiency of BUK and BUS in Indonesia is caused by output variables, namely the amount of financing and operating income. This study also revealed that the Covid-19 pandemic caused a decrease in the efficiency of the BUK, while the efficiency of the BUS was relatively stable and even slightly increased. Furthermore, based on an analysis of productivity during the Covid-19 pandemic, BUK and BUS in Indonesia experienced an increase due to high technological changes. Then this study also revealed the results of the Malmquist index score. Changes influence changes in productivity efficiency and changes in technology. This study finds that the dominant factor that causes the increase in productivity of BUK and BUS in Indonesia is influenced by technological change factors. Thus, digitalization in the banking industry sector is essential. This research also provides recommendations for several parties, such as practitioners, academics, and regulators.


Research Background
Covid-19, which first appeared in China in December 2019, has spread worldwide. The impact of the Covid-19 pandemic has arisen does not only attack from a health perspective but also has a global economic cost (Zheng and Zhang, 2020). The spread of this virus and the preventive measures taken by the government to reduce it are the main reasons for the cessation of production and consumption activities (Arianto, 2021). Likewise experienced by one of the economic sectors, namely the banking industry, which is the heart of a country's economy (Adeabah and Andoh, 2020). The Indonesian banking system generally consists of commercial and Islamic banks. By having the main objective as fundraising for financing sources, which support economic activities and economic growth. The development of the Islamic finance economy in Indonesia was pioneered by establishing the first Islamic bank, Bank Muamalat Indonesia, around 1992 (Ascarya & Yumanita, 2008a, 2008bRusydiana, 2018b). Then in 1998, Bank Indonesia notified that as part of the new banking law, there was a dual banking system, conventional and Islamic (sharia-based) (Seibel, 2007). Furthermore, over time the Islamic financial system developed rapidly side by side with the conventional financial system (Junaidi et al., 2021;Rahmatika, high score of 82.01 in 2020, Indonesia is still considered to have high potential in developing its Islamic finance industry. The market share of Islamic banking has increased from year to year, reaching 6.51% at the end of 2020 and then 6.55% at the beginning of 2021. Although this level of market share is an achievement in itself, Islamic banking still needs to strive for performance and efficiency as well as improvements in facing various emerging challenges, such as competition and conversion of sharia business units into sharia commercial banks (Rusydiana & As-Salafiyah, 2021).
In general, in improving people's welfare, Indonesian banking aims to support the implementation of national development to increase equity, economic growth, and national stability. Indonesian banking operates within a dual banking system or dual-banking system within the framework of the Indonesian Banking Architecture (API) to provide more complete banking service options to the public. Hand in hand, the Islamic banking system, and conventional banking together support the broad mobilization of public funds to increase financing capabilities (Rusydiana et al., 2019). Given this vital role, it is very important to develop a healthy banking system in which banks operate with good performance (Suzuki & Sastrosuwito, 2011).
Efficiency and productivity analysis are very important to do as a form of performance measurement and become one of the main factors in decision-making (Shang, 2005). Using 2 essential components, namely the available inputs to produce maximum output which can be used as one of the leading indicators in measuring competition (Hidayati, 2005). Especially during the Covid-19 pandemic, the measurement of banking efficiency and productivity is very important because banking efficiency is one of the benchmarks that underlies the overall performance of banking. Therefore, in assessing the performance of each bank, research is needed that specifically assesses the efficiency and productivity of each bank. The measure of bank efficiency is practically measured by the bank's ability to generate operating income using operational costs (Yonnedi & Rahman Panjaitan, 2019). Measurement of efficiency is an essential task in management, to better understand the past achievements of a unit and plan its development in the future (Kao, 2014). Thus, the study of efficiency becomes important considering that competition in the financial services industry is getting more challenging in the era of globalization. In short, only efficient banks will survive, and efficiency itself is related to productivity and profitability (Omar et al., 2007).
In achieving the objectives that have been described, the non-parametric approach of Data Envelopment Analysis (DEA) together with the Malmquist Index was used in this study. As for measuring bank productivity with more than one variable, it is done to get better results. The Malmquist index itself is part of the DEA method which specifically looks at the productivity level of each business unit so that changes in the level of efficiency and technology used will be seen based on predetermined inputs and outputs. In addition, the Malmquist Index is also used to analyze changes in performance over time. So that, in the end, it will be known the productivity of each bank, whether the productivity of a bank is increasing, stable, or decreasing condition (Firmansyah, 2019).
The efficiency of the financial services industry has long been the focus of banking research in recent decades. This is evidenced by the findings of research related to banking efficiency and productivity that have been carried out in Indonesia. Suzuki  the efficiency and productivity of the Regional Development Banks of Indonesia. However, research related to efficiency and productivity in the dual banking system, namely Islamic commercial banks and conventional commercial banks, is still limited.

Research Purpose
There are several objectives of this study, firstly, this study aims to measure and compare the efficiency of Conventional Commercial Banks (BUK) and Islamic Commercial Banks (BUS) Commercial Banks in Indonesia using the latest data in an observation period of five years (2016-2020). Thus, this research can be used as a guideline for Islamic banks to improve their weaknesses to be able to compete in the global market and achieve the goals that have been set to increase market share. In addition, the goal of strengthening the structure of Islamic banking can be achieved.
Furthermore, this paper is structured as follows. First, this paper presents the background and objectives of the research, the second part reviews the related literature, and the third part describes the methodology, including data and models. The fourth section presents and reports the results, and provides an analysis of the most productive and most efficient conventional and Islamic banks. The fifth section is the closing which contains a summary of the main discussions and recommendations.

Dual Banking System in Indonesia
Along with Indonesia's rapid economic system, financial institutions as intermediary tools are also growing. Since the birth of Law no. 19 of 1998, which amended Law no. 7 of 1992 concerning banking, the term dual banking system emerged, namely the conventional and The dominance of conventional banks that carry out usury-based transactions has made motivation and initiatives by Muslim scholars to empower Sharia law to overcome these problems (Achsani & Kassim, 2021). Recently, Indonesia has not only succeeded in implementing a dual banking system but has also emerged a complete Islamic banking system that operates in parallel with the conventional banking system, namely the Indonesian Islamic banking system (IIB) based on Sharia principles (Junaidi et al., 2021). Islamic banking emerged to meet the demand for Islamic financial services while avoiding illicit practices, such as usury, maysir, and gharar. Islamic banking has also emerged as an answer to public demands for economic and financial activities that align with Islamic teachings and principles (OJK, 2020).
In dynamic competition in the banking industry, Islamic banks are present as businesses that offer financial, investment, and trade opportunities that adhere to sharia principles (Afiatun & Wiryono, 2010). The rapid increase in Islamic banking and the importance of this sector to the country's economy make it essential to have better thought about its efficiency and drivers (Johnes et al., 2014). Efficiency measurement is essential to realize a healthy and sustainable financial performance and a picture of a company's performance. In analyzing a bank's performance, bank efficiency is one of the parameters. In short, a business unit is considered fully efficient if it achieves maximum output for a specific input level or uses a minimum input level to produce a specific output level (Rusydiana & As-Salafiyah, 2021). In addition, with this efficiency assessment, banks are expected to act rationally in minimizing the level of risk faced in carrying out their operational activities (Hidayati et al., 2017).
Thus, an efficient banking system can ensure the smooth running of the state payment system and the effective implementation of monetary policy. To assess the health and performance of the banking industry, the measurement must be checked through the measurement of bank efficiency as researched by several previous researchers who applied parametric and non-parametric approaches in measuring bank efficiency (Amalina et al., 2015).
Various methods can be used to measure the performance of banking efficiency, which can be grouped into two main categories: parametric and non-parametric. Furthermore, one of the nonparametric methods commonly used to estimate efficiency scores is Data Envelopment Analysis (DEA) (Hidayati et al., 2017).

Efficiency and Productivity
The concept of efficiency is often seen in terms of costs as inputs and profits as outputs.
Business entities always try to keep costs down to the minimum level possible to produce the maximum profit level of output. The concept of efficiency comes from the concept of microeconomics, namely the theory of producers. Producer theory tries to maximize profits or minimize costs from the producer's point of view. In the producer theory, a production frontier curve describes the relationship between inputs and outputs from the production process. This production frontier curve represents the maximum level of output from each input use that represents the use of technology from a company or industry (Hersinta & Akbar, 2013).
Productivity is a concept that measures the ratio of total output to the weighted average of inputs. At the same time, the two essential variants are labor productivity, which calculates the amount of output per unit of labor, and total factor productivity which measures output per unit of total inputs-however, the results scale. The increase has the potential to be significant in many sectors. On some ha scale, declining yields have occurred (Samuelson, Paul, Nordhaus, & William, 2003).
Productivity is a relationship between output and input in production, and productivity can be measured partially or totally; partial productivity is the relationship between output and one input. An example of partial productivity that is often used is labor productivity which shows the average output per worker, or capital productivity which describes the average output per capita. Total productivity, commonly called Total Factor Productivity (TFP), measures the relationship between output and several inputs simultaneously. The relationship is expressed in the ratio of the output index to the aggregate input index. If the ratio increases, more output can be produced using a certain amount of input or a certain number of inputs. Outputs can be produced using fewer inputs (Avenzora, 2008).
Efficiency and productivity are often used as measuring tools to calculate the achievement of a financial institution. This is usually associated with financial institutions achieving their goals.
Therefore, efficiency and productivity can be seen in financing and operations as outputs and fixed assets, labor, and customer funds as inputs. Efficiency can be known by calculating the ratio of output and input, while productivity is the relationship between output and input (Putra, Syifadhiya, Widyastiti, & Pambuko, 2018).

Previous Study
Since DEA was first introduced in 1978 in its current form, researchers in several fields (including banking) have realized that this methodology is very good and easy to use for modeling operational processes for performance evaluation. Based on previous research, it was found that many studies discussing efficiency performance in banking have been carried out using data envelopment analysis methods. Ismail

Research Methods Data
This study aims to analyze the efficiency and productivity of 14 Islamic Commercial Banks in Indonesia during a five-year observation period in the 2016-2020 period. In researching efficiency and productivity, input and output variables are needed. This study uses input and output variables that refer to the research conducted by (Hadad et al., 2003) and (Almas, 2018). The variables in this study can be seen in table 1 below: This method also provides information on how much input and output must be adjusted to achieve efficiency. There are two basic models in the analysis using DEA including the Charnes,

Malmquist Productivity Index (MPI)
The DEA-based Malmquist Productivity Index (MPI) was originally introduced by Caves,

Result and Discussion
Banking Efficiency Analysis  In addition to analyzing the efficiency of Conventional Commercial Banks (BUK), this study also aims to analyze the efficiency of Islamic Commercial Banks (BUS) in Indonesia with a total of 14 banks. In analyzing bank efficiency, this study uses the CRS and VRS approaches. Table 3 results of the average efficiency score using the CRS and VRS approaches, it is known that none of the banks has succeeded in achieving maximum efficiency (1,000

Total Factor Efficiency Changes (TFPCH) are influenced by Efficiency Changes (EFFCH) and
Technological Changes (TECHCH). Meanwhile, Pure Efficiency Changes (PECH) and Scale Efficiency Changes (SECH) are used to determine the causes of changes to Efficiency Changes (EFFCH). If the TFPCH value shows M>1, this indicates that there has been an increase in productivity. M=1 indicates that there has been no increase in productivity, and M<1 indicates a decrease in bank productivity.  to year. If you look at the average productivity score over the five-year observation period, it is known that BUS productivity has increased with changes in technology (TECHCH) which have increased, although changes in efficiency (EFFCH) have decreased.
As already mentioned, productivity is determined by changes in technology and efficiency. In 2016-2017 it is known that the average bank productivity has increased with changes in technology that have increased, even though bank efficiency has decreased. Furthermore, in 2017-2018, it is known that bank productivity has decreased with changes in technology and the efficiency of both has also decreased. Then in 2018-2019, it is known that productivity decreased, but when compared to the previous year productivity increased. In that year it was known that technological change experienced a slight increase, although efficiency decreased. Finally, in 2019-2020 it is known that bank productivity has increased significantly with changes in technology that have experienced a drastic increase, although efficiency has decreased significantly compared to previous years. From the results of further analysis regarding the productivity of Conventional Commercial Banks in Indonesia, it can be seen that the dominant factor influencing the increase in bank productivity is technology.

The Impact of the Covid Pandemic on Bank Efficiency and Productivity
The Impact of the Covid-19 Pandemic on the Efficiency of BUK and BUS in Indonesia Potential Improvement analysis is carried out to analyze the input and output variables that cause bank inefficiencies. The results of the potential improvement analysis can be used as a reference for companies to improve efficiency in the following year. Then the potential improvement analysis is carried out by relinquishing the last year of the research period which in this case is 2020. Figure 7 shows the results of the potential improvement analysis of Conventional Commercial Banks in Indonesia, from these results it can be seen that the causes of BUK inefficiency mostly come from output variables namely the amount of financing and operating income. In order for banks to improve efficiency, the output variable, namely the amount of financing, needs to be increased by 41% and operating income needs to be increased by 39%.
In addition to providing an analysis of potential improvement for BUK, this research also provides an analysis of potential improvement for BUS in Indonesia. Figure 8 shows the results of the potential improvement analysis of Islamic Commercial Banks in Indonesia. Similar to Conventional Commercial Banks, from these results it can be seen that the cause of bank inefficiency comes from the output variables, namely the amount of financing and operating income. So that Islamic Commercial Banks can increase their efficiency, the output variable, namely the amount of financing, needs to be increased by 55% and operating income needs to be increased by 31%. Various factors cause inefficiency in the banking industry, especially Islamic commercial banks in Indonesia, including the inability of banks to balance the use of input and output variables as described in Figures 7 and 8. The results of the potential improvement analysis carried out discussed the input and output variables that cause bank inefficiencies. In short, an institution can be said to be efficient if it can use its input to produce maximum output without wasting resources (Naufal & Firdaus, 2018). Line with Prativi, Dewi & Lubis (2020) states that an institution is said to be efficient if it can produce maximum output at a certain level of input, or can minimize costs (input) to achieve a certain level of output. The causes of the inefficiencies of the two types of banks will be explained in the potential improvement analysis.
The second finding of this study can be seen from the Malmquist Index scores of BUK and BUS in Indonesia. As already mentioned, bank productivity is influenced by two factors, namely changes in technology and efficiency. In the case of BUK and BUS in Indonesia, it is known that the dominant factor causing an increase in bank productivity is influenced by changes in technology. As explained in Figure 6, it is known that during the Covid- 19  Indonesia decreased due to a decrease in income and financing distribution, while banking operational costs continued to increase to meet the daily needs of banking operations. Therefore, it is very necessary to make efforts to improve the banking sector to achieve an optimal level of efficiency The fifth finding of this study is related to the analysis of banking potential improvement.
From the results of this analysis, it is known that the cause of the inefficiency of BUK and BUS in Indonesia comes from the output variables, namely the amount of financing and operating income. Efficiency in financing can be measured by two aspects of assessment, the first is the bank's ability to produce output, which in this case is low-cost financing, and this aspect has a close relationship with the financing ratio and the development of bank assets. Furthermore, the second aspect is the bank's performance in minimizing risk in the financing, or the bank's ability to channel financing and minimize risk (Iskandar, 2012). Improving the efficiency and effectiveness of financing products will encourage the growth of banking assets and profitability. In addition, this will also increase the role of banking in managing customer funds so that their allocation can be more effective and efficient for the common good (Hibatullah & Nurcahyani, 2021).

Conclusion
This study aims to analyze and compare the efficiency and productivity of Conventional Commercial Banks (BUK) and Islamic Commercial Banks (BUS) in Indonesia with a total of 19 BUK and 14 BUS during the five-year observation period (2016-2020). In measuring efficiency, this study uses two approaches, namely CRS and VRS using Data Envelopment Analysis, meanwhile to analyze the productivity of this study using the VRS model using the Malmquist Productivity Index.
The results obtained from the efficiency analysis using DEA show that there are still many BUK and BUS in Indonesia that have not achieved maximum efficiency, and there are even BUK and BUS that have low efficiency. When compared between the two types of banks, based on the results of the analysis it is known that BUK has higher efficiency compared to BUS.
Furthermore, this study also reveals the results of the Malmquist index score on BUK and BUS in Indonesia changes in productivity are influenced by the level of changes in efficiency and changes in technology. This study found that the dominant factor causing the productivity of BUK and BUS in Indonesia was influenced by technological change.
Based on the results of an analysis of the efficiency of BUK and BUS in Indonesia during the Covid-19 pandemic, namely in the last two years of the research period (2019-2020), the results show that the efficiency of BUK has decreased, meanwhile the efficiency of BUS has been relatively stable and has even increased slightly. Furthermore, when viewed from a productivity standpoint during the Covid-19 pandemic, BUK and BUS experienced an increase in productivity due to high changes in terms of technology, even though changes in efficiency had decreased. Then, based on the results of the potential improvement analysis from BUK and BUS in Indonesia, it shows that the variable causing bank inefficiency comes from the output variable, namely the amount of financing provided and operating income.

Recommendation
There are several suggestions from the research results for some parties, both practitioners, academics, and regulators. For banking practitioners, especially BUK and BUS in Indonesia, it is hoped that they can maximize the amount of financing to the public by offering financing products that are more competitive than conventional products. Besides, marketing techniques must be more innovative so that they can be absorbed by various circles of society. The next suggestion for banking practitioners is that they must improve the quality of innovation and use of technology and create digital banking products for customers. Then, suggestions for academics are to update information on banking efficiency and productivity by upgrading the research period and expanding the object of research. With further research conducted by academics, it is hoped that they can find ways to improve banking efficiency and productivity.
Finally, there is a suggestion for regulators, namely that technology and digitalization regulatory support is needed for Islamic banking to improve quality and productivity.