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Efficiency of islamic and conventional banks in countries with islamic banking

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Listed author(s):
  • Kablan, S
  • Yousfi, O

Abstract

Our study aims at analyzing Islamic banks efficiency over the period 2001-2008. We found that they were efficient at 78.9%. The level of efficiency could however vary according to regions. Asia displays the highest score with 84.64%. Indeed, country like Malaysia and Pakistan implemented reforms in order to allow Islamic banks to better cope with the existing financial system. On the contrary countries with Islamic banking system do not necessarily display efficiency scores superior to the average. Further analyses on commercial banks, in the selected countries strengthen the conclusion for a regulatory environment suiting Islamic banking. Besides, the subprime crisis did not impact Islamic banks as evidenced by the dummy variable. Market power and profitability have negative impact on Islamic banks efficiency. Concentration leads to higher costs through slacks and inefficiency. Again other results from robustness checks appear to stress the specificity of Islamic banks, like their first aim for financing rural population.

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File URL: https://mpra.ub.uni-muenchen.de/32951/1/MPRA_paper_32951.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32951.

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Date of creation: Jul 2011
Handle: RePEc:pra:mprapa:32951
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Keywords: Islamic Finance; Islamic Banks; performance; efficiency; stochastic frontier analysis;

Find related papers by JEL classification:

  • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
  • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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  1. Martin Čihák & Heiko Hesse, 2010. "Islamic Banks and Financial Stability: An Empirical Analysis," Journal of Financial Services Research, Springer;Western Finance Association, vol. 38(2), pages 95-113, December.
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  16. English, M. & Grosskopf, S. & Hayes, K. & Yaisawarng, S., 1993. "Output allocative and technical efficiency of banks," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 349-366, April.
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  18. Dietsch, Michel & Lozano-Vivas, Ana, 2000. "How the environment determines banking efficiency: A comparison between French and Spanish industries," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 985-1004, June.
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  20. Yudistira, Donsyah, 2004. "Efficiency In Islamic Banking: An Empirical Analysis Of Eighteen Banks," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 12, pages 2-19.
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Cited by:

  1. Sakarya, Burchan & Kaya, Yasemin, 2013. "Katılım Bankaları Mevduat Bankalarından Farklı mı Çalışıyor
    [Performance Differentiation Between Participation (Islamic) Banks and Deposit Banks in Turkey]    ," MPRA Paper 69196, University Library of Munich, Germany.
  2. Ahmed Imran Hunjra & Amber Bashir, 2014. "Comparative Financial Performance Analysis of Conventional and Islamic Banks in Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 3(4), pages 196-206, December.
  3. Chatti , Mohamed Ali & Kablan, Sandrine & Yousf, Ouidad, 2013. "Are Islamic Banks Sufficiently Diversified? An Empirical Analysis of Eight Islamic Banks in Malaysia," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 21, pages 23-54.
  4. Belanès, Amel & Ftiti, Zied & Regaïeg, Rym, 2015. "What can we learn about Islamic banks efficiency under the subprime crisis? Evidence from GCC Region," Pacific-Basin Finance Journal, Elsevier, vol. 33(C), pages 81-92.

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