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All Journal Islamic Economics and finance in Focus (IEFF)
Mukaromah, Najati Fadilatul
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Religion Economics, Econometrics & Finance Social Sciences

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Convergence of Financial Performance Between Islamic and Conventional Banks in Indonesia (2020-2024) Mukaromah, Najati Fadilatul; Ajeng Kartika Galuh
Islamic Economics and finance in Focus Vol. 5 No. 4 (2026)
Publisher : Fakultas Ekonomi dan Bisnis Universitas Brawijaya

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.21776/

Abstract

Indonesia operates a dual banking system in which Islamic and conventional banks coexist under the same regulatory framework. Despite their coexistence, empirical evidence on whether their financial performance converges over time remains limited. This study examines the convergence of financial performance between Islamic and conventional banks in Indonesia during 2020–2024 using profitability (ROA and ROE), operational efficiency (BOPO), capital adequacy (CAR), and asset quality (NPF/NPL) indicators. The analysis employs β-convergence panel regression and σ-convergence dispersion analysis. The results show negative and statistically significant β coefficients for all indicators, confirming a catching-up process within the banking industry. Islamic banks converge more rapidly in profitability (ROA) and capital adequacy (CAR), while no significant differences are found for ROE, BOPO, and NPF/NPL. In addition, the σ-convergence analysis indicates a decline in performance dispersion during the study period. These findings suggest that the performance gap between Islamic and conventional banks is narrowing and provide evidence to support policies that strengthen the competitiveness and stability of Indonesia's dual banking system.
Co-Authors Ajeng Kartika Galuh