The Prospect of Dual Unit Banking System in Indonesian Regional Banking
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This study aims to investigate the prospect of dual unit banking system, which is Islamic banking unit in conventional banking system, on Indonesian regional banking. To find out the prospect of dual unit banking system, we use panel regression of GLS estimation method in order to discover the influence of existence of dual banking system to profitability and liquidity. The profitability is represented by return on equity (ROE) and liquidity is proxied by loan to deposit ratio (LDR). We also include the other assets and liability management (ALMA) variables as the other independent variables. This study uses 26 samples of regional banks and we use dummy method to find out the influence of existence of dual unit banking on profitability and liquidity. The result showed that dual unit banking system has a positive and significant influence on liquidity, however it has negative and significant relationship on profitability. This indicates the existence of unit banking system is needed to maintain the role of banking as intermediary institution, however the capital needed to implement dual unit banking system also needed to be improved in order to get a positive relationship between dual unit banking system and return on equity. Islamic banking unit has a good prospect for liquidity but it still needs a strong attention of assets and liability management in order to get a good prospect for profitability.
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