Comparative Study Islamic Banking and Conventional Banking of Rural Banking in Riau Province

Agustin, Hamdi and Azmansyah, Azmansyah (2017) Comparative Study Islamic Banking and Conventional Banking of Rural Banking in Riau Province. In: Proceedings of the Second International Conference on the Future of ASEAN (ICoFA) 2017, 15-16 Agustus 2017, Perlis, Malaysia.

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Abstract

One of the unique banking in Indonesia is the rural banks (RB) (bank perkereditan rakyat, BPR). One form of microfinance institutions (MFIs) for poverty reduction is a rural bank. RB as one of the banking institutions has an important role in supporting the economy of Indonesia. The purpose of this study is to comparing the performance of RB which has Islamic system with RB which conventional system. The population and sample consists of 26 RB in Riau province. The period of this study is from 2012 to 2015. Data are taken from the bank’s annual reports. This study using panel data and using pooled Ordinary Least Squares (OLS) and random effect. The results indicate that the dummy variable ownership and systems of banks, total assets, equity and the cost impact on the rural banks performance. While the region dummy variable is not significant to the performance of rural banks. We find that the Islamic banking of rural banks in Riau province perform better than the Conventional banking system. This suggests that the conventional systems due to the bank is not burdened with payment of the deposit fee is fixed, relatively more honest customer honesty in the payment of loans and revenue Islamic bank financing is greater than the various forms of financing offered to customers.

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