Competitive condition and market power of Islamic banks in Indonesia

  • Muhamad Abduh
  • International Journal of Islamic and Middle Eastern Finance and Management, April 2017, Emerald
  • DOI: 10.1108/imefm-09-2015-0098

This paper examines the competitive conditions and market power of Islamic banks in Indonesia

What is it about?

Using samples of 27 Islamic banks, the study uses a variety of structural and non-structural measures related to the traditional approach and the new empirical approach of the industrial organization. The methodology is based on a set of measures of the competition and market power. The first measures, concentration ratios and Herfindahl–Hirschman index, are to determine the competitiveness level, while the second measures of Panzar–Rosse H-statistic and Lerner index are to examine the market power of Islamic banks in Indonesia.

Why is it important?

The paper is a very useful source of information that may provide relevant guidelines in guiding the future development of competition of Islamic Banking industry. In addition, the paper provides relevant guidelines for improving competitiveness of Islamic banks.


Dr Muhamad Abduh
Universiti Brunei Darussalam

This study combines two approaches for bank competition measurement and bank market powers measurement which can provide more robust findings. To the best of the authors’ knowledge, the study on Islamic banking competitiveness level and market power is very limited, especially in the case of Indonesia. Therefore, this study could contribute significantly toward the literature of the related field.

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