PSYCHOLOGY AND EDUCATION (2021) 58(1): 375-381 ISSN: 00333077 375 www.psychologyandeducation.net The Efficiency of Islamic Banks and Conventional Banks in Indonesia Using Data Envelopment Analysis Approach Retno Fitrianti 1 , Sri Undai Nurbayani 2 {retno_fitrianti@fe.unhas.ac.id 1 , sri.undai@gmail.com 2 } Faculty of Economics and Business, Hasanuddin University, Makassar, Indonesia. 1,2 ABSTRACT Banking sector mediation is related to efficiency in economic performance. As a financial institution, banks need to maintain their performance in order to operate optimally, one factor that must be considered is efficiency in performance. This research aimed to analyze the efficiency of Islamic Banks and Conventional Commercial Bank in Indonesia. Using a purposive sample technique for two Islamic banks and two commercial banks. Fixed assets, deposits, and other operating expenses as input variables used, while credit as output variable. Using Data Envelopment Analysis to calculate the efficiency of banking. The results show that all Sharia Commercial Bank samples reached efficiency level 1 was efficient. Besides, the sample of conventional commercial banks used in this study is not all efficient. This is due to one of the sample banks having an efficiency level below one, which is 0.644. It means that conventional bank groups are inefficient. Keywords: Efficiency , Islmic Banks, Conventional Banks, DEA JEL Classification: G21, G28 Article Received: 18 October 2020, Revised: 3 November 2020, Accepted: 24 December 2020 1 Introduction The development of Islamic banking in Indonesia has become a benchmark for the success of Islamic economic existence. Bank Muamalat as the first Islamic bank and became a pioneer for other Islamic banks has first implemented this system in the midst of the mushrooming of conventional banks. The Financial Services Authority (OJK) states that the development of Islamic banking in the past 8 years is classified as rapid. The concept of efficiency in banking is one of the parameters of performance that is quite popular, because it is widely used to answer the difficulties in calculating performance measures as mentioned above. The identification of input and output allocations is further analyzed to see the causes of inefficiency. Along with the development of Islamic banking, Islamic banking finance expansion quantity also rose significantly. Islamic banking development according to the FSA at least can be monitored with indicators such as total Third- Party Fund (DPK), total assets, and total financing disbursed. However, this amount is still far below the indicators achieved by conventional banking. Islamic banking also only gets a market share of around 4%. Table 1 report a comparison table of indicators of Islamic Bank and Commercial Bank following: Table 1. Component Indicators Conventional and Islamic Banks period 2014-2016 (Billion Rupiah) Conventional Islamic Years Asset DPK Crdit Years Asset DPK Credit 2014 5.410.098 4.114.420 3.706.501 2014 204.961 170.723 147.944 2015 5.919.390 4.413.056 4.092.104 2015 213.423 174.895 153.968 2016 6.475.602 4.092.104 4.413.414 2016 254.184 206.407 177.482 Source: Indonesian Banking Statistics, OJK, 2016, own processed.