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A Comparative Efficiency Analysis of Interest Free Financial Institutions and Conventional Banks: A Case Study on Turkey

Author

Listed:
  • Savas Alpay

    (SESRTCIC)

  • M. Kabir Hassan

    (Department of Economics and Finance, University of New Orleans)

Abstract

In this paper, we will analyze the comparative performance of the Interest Free Financial Institutions (IFFIs) in Turkey as regards to conventional banks by employing a data envelope analysis (DEA)-type Malmquist Index for the period 1990-2000. Our analysis will also include the investigation of the sources of efficiency differences and changes such as pure technical efficiency change (improvement in management), and scale efficiency change (improvement towards optimal size). Alternative approaches like cost, profit, and revenue efficiencies will be incorporated into our analysis as well. Countries like Turkey present an experimental environment where both interest-free and interest based systems coexist, and where people make their choices on where to hold their savings. Thus, the Turkish experience will be very useful in identifying the advantages and disadvantages of the interest-free system in order to make its survival and expansion more likely.

Suggested Citation

  • Savas Alpay & M. Kabir Hassan, 2007. "A Comparative Efficiency Analysis of Interest Free Financial Institutions and Conventional Banks: A Case Study on Turkey," Working Papers 0714, Economic Research Forum, revised Nov 2007.
    • Handle: RePEc:erg:wpaper:0714
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    Cited by:

    1. Aysan, Ahmet Faruk & Ertek, Gurdal & Ozturk, Secil, 2009. "Assessing the adverse effects of interbank funds on bank efficiency through using semiparametric and nonparametric methods," MPRA Paper 38113, University Library of Munich, Germany.

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