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Abstract
For past years, many critics has been faced on Microfinance institutions (MFIs) facing because of their tendency of taking high margin. Therefore, it is important to understand the factors that affect margin in microfinance industry. This study examines the effect of MFIs growth, competition, and efficiency on the margin. The data collected from Otoritas Jasa Keuangan (OJK) database from 2011-2016 and conducted on Indonesian Islamic MFIs. The final sample used in this study consists of a total of 2160 observations. This study uses panel data regression model analysis to analyze the obtained data. The results obtained from this study showed that Net-profit-and-loss sharing margins (NPLS) are able to be explained by MFIs growth and efficiency but not with HHI, which is the proxy of the degree of competition.
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References
Allen, L. 1988. The determinants of bank interest margins: A note. Journal of Financial and Quantitative analysis 23 (2): 231-235.
Ascarya, A. and D. Yumanita. 2010. ‘Determinants of Bank’s net interest margin in Indonesia’. In Proceedings of the International Conference on Eurasian Economies.
Asimakopoulos, I., A. Samitas, and T. Papadogonas. 2009. Firm-specific and Economy Wide Determinants of Firm Profitability: Greek Evidence Using Panel Data. Managerial Finance 11: 930–939.
Barajas, A., R. Steiner, and N. Salazar. 1999. Interest Spread in Banking in Colombia 1974-96. IMF Staff Paper 46: 196-224.
Chortareas, G. E., J. G. Garza-García, and C. Girardone. 2012. Competition, efficiency and interest rate margins in Latin American banking. International Review of Financial Analysis 24: 93–103.
Demirguc-Kunt, A. and H. Huizinga. 1999. Determinant of Commercial Bank Interest Margins and Profitability: Some International Evidence. The World Bank Economic Review 13 (2): 379-408.
Effendi, J. 2010. Mengembangkan Lembaga Keuangan Mikro Syariah. Iqtishodia: Jurnal Ekonomi Islam Republika November 2010.
Fry, M. J. 1995. Money, Interest and Banking in Economic Development, Second ed. Marryland: John Hopkins University Press.
Gelos, R. G. 2006. Banking Spreads in Latin America. IMF Working Paper/06/44, International Monetary Fund, Washington.
Gujarati, D. N. and D. C. Porter. 2009. Basic Econometrics5th edition. New York: McGraw Hill/Irwin.
Hadad, M. D., W. Santoso, and S. B. Dwityapoetra. 2003. Intermediation Cost Study of Some Banks in Indonesia: Is Interest Credit Banks overpriced?. Bank Indonesia Working Paper, Bank Indonesia, Indonesia.
Ho, T. and A. Saunders. 1981. The determinants of banks interest margins: Theory and empirical evidence. Journal of Financial and Quantitative Analysis 16 (4): 581-600.
Iqbal, M. and P. Molyneux. 2005. Thirty Years of Islamic Banking: History, Performance and Prospects. London: Palgrave Macmillan.
Khrawish, H. A. 2011. Determinants of Commercial Banks Performance: Evidence from Jordan. International Research Journal of Finance and Economics Zarqa University 5 (5): 19-45.
Levine, R. 1997. Financial Development and Economic Growth. Journal of Economic Literature 35 (2): 688-726.
Maudos, J. and J. Fernandez de Guevara. 2004. Factors explaining the interest margin in the banking sectors of the European Union. Journal of Banking and Finance 28: 2259-2281.
Maudos, J. and L. Solis. 2009. The determinants of net interest income in the Mexican banking system: An integrated model. Journal of Banking & Finance 33: 1920-1931.
Melmies, J. 2015. Effects of competition on profit margins from a Post Keynesian perspective. Advancing the Frontiers of Heterodox Economics: Essays in Honor of Frederic S. Lee.
Peria, M. S. M. and A. Mody. 2004. How Foreign Participation and Market Concentration Impact Bank Spreads: Evidence from Latin America. World Bank Policy Research Working Paper 3210, World Bank, Washington.
Raharjo, P. G., D. B. Hakim, A. H. Manurung, and T. N. A. Maulana. 2014. The Determinant of Commercial Banks’ Interest Margin in Indonesia: An Analysis of Fixed Effect Panel Regression. International Journal of Economics and Financial Issues 4 (2): 295-308.
Randall, R. 1998. Interest Rate Spread in the Eastern Caribbean. IMF Working Paper 98/59, International Monetary Fund, Washington.
Reyna, O. T. 2007. Panel data analysis: fixed and random effects using STATA. New Jersey: Princeton University.
Saunders, A. and L. Schumacher. 2000. The determinants of bank interest rate margins: An international study. Journal of International Money and Finance 19: 813-832.
Trinugroho, I, A. Agusman, and A. Tarazia. 2014. Why have bank interest margins been so high in Indonesia since the 1997/1998 financial crisis?. Research in International Business and Finance 32: 139–158.
Zarruk, E. and J. Madura. 1992. Optimal Bank Interest Margin under Capital Regulation and Deposit Insurance. Journal of Financial and Quantitative Analysis 27 (1): 143-149.
References
Allen, L. 1988. The determinants of bank interest margins: A note. Journal of Financial and Quantitative analysis 23 (2): 231-235.
Ascarya, A. and D. Yumanita. 2010. ‘Determinants of Bank’s net interest margin in Indonesia’. In Proceedings of the International Conference on Eurasian Economies.
Asimakopoulos, I., A. Samitas, and T. Papadogonas. 2009. Firm-specific and Economy Wide Determinants of Firm Profitability: Greek Evidence Using Panel Data. Managerial Finance 11: 930–939.
Barajas, A., R. Steiner, and N. Salazar. 1999. Interest Spread in Banking in Colombia 1974-96. IMF Staff Paper 46: 196-224.
Chortareas, G. E., J. G. Garza-García, and C. Girardone. 2012. Competition, efficiency and interest rate margins in Latin American banking. International Review of Financial Analysis 24: 93–103.
Demirguc-Kunt, A. and H. Huizinga. 1999. Determinant of Commercial Bank Interest Margins and Profitability: Some International Evidence. The World Bank Economic Review 13 (2): 379-408.
Effendi, J. 2010. Mengembangkan Lembaga Keuangan Mikro Syariah. Iqtishodia: Jurnal Ekonomi Islam Republika November 2010.
Fry, M. J. 1995. Money, Interest and Banking in Economic Development, Second ed. Marryland: John Hopkins University Press.
Gelos, R. G. 2006. Banking Spreads in Latin America. IMF Working Paper/06/44, International Monetary Fund, Washington.
Gujarati, D. N. and D. C. Porter. 2009. Basic Econometrics5th edition. New York: McGraw Hill/Irwin.
Hadad, M. D., W. Santoso, and S. B. Dwityapoetra. 2003. Intermediation Cost Study of Some Banks in Indonesia: Is Interest Credit Banks overpriced?. Bank Indonesia Working Paper, Bank Indonesia, Indonesia.
Ho, T. and A. Saunders. 1981. The determinants of banks interest margins: Theory and empirical evidence. Journal of Financial and Quantitative Analysis 16 (4): 581-600.
Iqbal, M. and P. Molyneux. 2005. Thirty Years of Islamic Banking: History, Performance and Prospects. London: Palgrave Macmillan.
Khrawish, H. A. 2011. Determinants of Commercial Banks Performance: Evidence from Jordan. International Research Journal of Finance and Economics Zarqa University 5 (5): 19-45.
Levine, R. 1997. Financial Development and Economic Growth. Journal of Economic Literature 35 (2): 688-726.
Maudos, J. and J. Fernandez de Guevara. 2004. Factors explaining the interest margin in the banking sectors of the European Union. Journal of Banking and Finance 28: 2259-2281.
Maudos, J. and L. Solis. 2009. The determinants of net interest income in the Mexican banking system: An integrated model. Journal of Banking & Finance 33: 1920-1931.
Melmies, J. 2015. Effects of competition on profit margins from a Post Keynesian perspective. Advancing the Frontiers of Heterodox Economics: Essays in Honor of Frederic S. Lee.
Peria, M. S. M. and A. Mody. 2004. How Foreign Participation and Market Concentration Impact Bank Spreads: Evidence from Latin America. World Bank Policy Research Working Paper 3210, World Bank, Washington.
Raharjo, P. G., D. B. Hakim, A. H. Manurung, and T. N. A. Maulana. 2014. The Determinant of Commercial Banks’ Interest Margin in Indonesia: An Analysis of Fixed Effect Panel Regression. International Journal of Economics and Financial Issues 4 (2): 295-308.
Randall, R. 1998. Interest Rate Spread in the Eastern Caribbean. IMF Working Paper 98/59, International Monetary Fund, Washington.
Reyna, O. T. 2007. Panel data analysis: fixed and random effects using STATA. New Jersey: Princeton University.
Saunders, A. and L. Schumacher. 2000. The determinants of bank interest rate margins: An international study. Journal of International Money and Finance 19: 813-832.
Trinugroho, I, A. Agusman, and A. Tarazia. 2014. Why have bank interest margins been so high in Indonesia since the 1997/1998 financial crisis?. Research in International Business and Finance 32: 139–158.
Zarruk, E. and J. Madura. 1992. Optimal Bank Interest Margin under Capital Regulation and Deposit Insurance. Journal of Financial and Quantitative Analysis 27 (1): 143-149.