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Risks and Efficiency in the Islamic Banking Systems: The Case of Selected Islamic Banks in MENA Region

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  • Ali Said

    (Strayer University, United States)

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    Abstract

    The present paper examined the correlation between risks and efficiency within Islamic banks in the MENA area. This paper used three stages of analyses. The first stage consisted of measuring the efficiency of those banks by employing the nonparametric technique, Data Envelopment Analysis (DEA) while the second stage involved analyzing risks by measure credit, operational, and liquidity risks using financial ratios. The third stage would be employing Pearson Correlation Coefficients to examine the correlation between credit, operational, liquidity risks to efficiency for the period of 2006 to 2009. The study results have revealed credit risk has negative relationship to efficiency, while operational risk has found to be negatively correlated to efficiency too. The liquidity risk showed insignificant correlation to efficiency in Islamic banks in MENA area.

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    File URL: http://www.econjournals.com/index.php/ijefi/article/download/337/pdf
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    File URL: http://www.econjournals.com/index.php/ijefi/article/view/337/pdf
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    Bibliographic Info

    Article provided by Econjournals in its journal International Journal of Economics and Financial Issues.

    Volume (Year): 3 (2013)
    Issue (Month): 1 ()
    Pages: 66-73

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    Handle: RePEc:eco:journ1:2013-01-7

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    Web page: http://www.econjournals.com

    Related research

    Keywords: Efficiency; Liquidity Risk; Credit Risk; Operational Risk; Islamic Banks; MENA banking; Data Envelopment Analysis;

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    1. Pastor, JoseManuel & Perez, Francisco & Quesada, Javier, 1997. "Efficiency analysis in banking firms: An international comparison," European Journal of Operational Research, Elsevier, vol. 98(2), pages 395-407, April.
    2. Hameeda Abu Hussain & Jasim Al-Ajmi, 2012. "Risk management practices of conventional and Islamic banks in Bahrain," Journal of Risk Finance, Emerald Group Publishing, vol. 13(3), pages 215-239.
    3. Bauer, Wolfgang & Ryser, Marc, 2004. "Risk management strategies for banks," Journal of Banking & Finance, Elsevier, vol. 28(2), pages 331-352, February.
    4. repec:lan:wpaper:601084 is not listed on IDEAS
    5. Hussein A. Hassan Al-Tamimi & Faris Mohammed Al-Mazrooei, 2007. "Banks' risk management: a comparison study of UAE national and foreign banks," Journal of Risk Finance, Emerald Group Publishing, vol. 8(4), pages 394-409, August.
    6. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
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