An Evaluation of Financial Stress for Islamic Banks in Indonesia Using a Bankometer Model

Abstract

Objective - In recent years, the market share of Indonesian Islamic banks has declined. The purpose of this study is to assess the financial distress being experienced by Islamic banks in Indonesia by using the Bankometer's score. This study will also uncover any differences between listed and non-listed Islamic banks using the Bankometer model. The Bankometer model is a model developed by the IMF (2000) to measure the financial soundness of banks. Methodology/Technique - The study uses data obtained between 2011 and 2015 using a purposive sampling model. The sample consists of 11 Islamic Banks in Indonesia. Findings - The results show that all Islamic banks are categorized as very healthy throughout the period of the research. Using and independent t-test, it is shown that there are differences between non-performing loans from listed and non-listed Islamic banks. However, there are no significant differences between Variable Capital Asset, Equity Asset, Cost to Income and Loan to Asset. Novelty - The study uses Bankometer's score to evaluate financial distress. Type of Paper - Empirical Keywords: Bankometer Model; Financial Distress; Islamic Banks. JEL Classification: E44, F14, G01.