Efficiency and performance of Islamic banks amid COVID-19

Purpose - This paper aims to investigate the efficiency and performance of the Islamic banking industry amid the COVID-19 pandemic. Design/methodology/approach - The authors used a two-stage data envelopment analysis to first estimate the efficiency of 78 Islamic banks (IBs) across 15 countries for the 2005–2020 period (a total of 782 bank-year observations) and then to examine their determinants, including the COVID-19 pandemic. Findings - The authors found that the Islamic banking industry performed at a moderate level during the 2005–2020 period, providing evidence that IBs are resilient to the financial shocks created by COVID-19. The authors also found that bank-level characteristics (such as bank size) and country-level characteristics (such as inflation) can contribute to the bank’s operational efficiency. Research limitations/implications - The results of this study suggested that banking management and government macroeconomic policy, especially in terms of precautions and continuous support, are important for IBs to improve their performance. Originality/value - To the best of the authors’ knowledge, this is the first study to examine the efficiency and performance of IBs amid COVID-19.