ANALYSIS OF EFFICIENCY OF INTERMEDIATION FUNCTIONS FROM FINANCIAL INSTITUTIONS AND CONSUMER SURPLUS OF FUNDS IN INDONESIA

Abstract

The number of reserves in banking that exceeds the amount of credit that customers do not pay off will be a problem because it will burden the bank and increase its operational costs. High operating costs will worsen banking efficiency. Therefore, banks need to manage their assets and liabilities to maintain their liquidity and earn business profits in carrying out their business. This study looks at banking efficiency from the intermediation function approach. This study aims to analyze the efficiency of the intermediation function of financial institutions and the consumer surplus of funds in the funds market in Indonesia. The Autoregressive Distributed Lag (ARDL) model with the PMG estimator analyzes efficiency, loan interest rates, and consumer surplus funds using panel data from conventional banks during the 2000 – 2019 observation period. The results demonstrated the validity of the three models used to estimate EFI, Interest, and Consumer Fund Surplus. All independent variables employed in the three models influence EFI, Interest, and Consumer Fund Surplus statistically. Each Model's independent variables are cointegrated and have a long-term connection with EFI, Interest, and Consumer Fund Surplus. The research findings have the following policy implications. In this digital era, EFI measures must incorporate elements of changes in financial service technology, and monetary authority regulations are required to discipline banking actors so that the management of banking assets and liabilities becomes more efficient. Using multiplier effect analysis, Consumer Surplus Funds in the fund market will be used to measure changes in the level of satisfaction and public welfare in the goods and services market.