September 5, 2025Open Access

Do we need large Islamic rural banks?

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Dynamic panel regression analysis reveals asset and efficiency effects on profitability in Islamic rural banks.

The study shows that higher assets initially improve profitability but may later have an inverted effect.
Key evidence indicates a minimum asset requirement of approximately 187 billion for optimal profitability in these banks.
This analysis employs dynamic panel regression using the GMM method across 90 banks on Java Island from 2018 to 2021.
The findings suggest a focus on enhancing capital adequacy and operational efficiency for Islamic rural banks.

Hendri et al. (2025) studied this question.

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