The Stability Comparison between Islamic Banks and Conventional Banks: Evidence in Indonesia

This study aims to determine the stability of Islamic banking as compared with conventional banking in Indonesia. In this case, the level of bank stability is measured individually using an accounting-based bank soundness measurement called the Z-score indicator. Using the parametric statistical t-test, the study shows that the level of stability in Islamic banks versus conventional banks is significantly different. This research uses the sample data of 12 Islamic banks and 71 conventional banks in Indonesia during the period of 2004–2009. The results show that the Islamic banks in general have a lower degree of stability compared to the conventional ones. Some exclusions include the tendency for small Islamic banks to have relatively the same degree of stability as small conventional banks. During the crisis period of 2008–2009, Islamic banks and conventional banks tended to have the same relative degree of stability. Interestingly, the stability of full-fledged Islamic banks (BUS) is lower than Islamic business units (UUS). © Authors