Kablan, S and Yousfi, O (2011): Efficiency of islamic and conventional banks in countries with islamic banking.
This is the latest version of this item.
Download (1201Kb) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Efficiency of islamic and conventional banks in countries with islamic banking|
|Keywords:||Islamic Finance, Islamic Banks, performance, efficiency, stochastic frontier analysis|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
|Depositing User:||Sandrine Kablan|
|Date Deposited:||23. Aug 2011 13:34|
|Last Modified:||12. Feb 2013 07:49|
• AIGNER, D., LOVELL, D., SCMIDT P., 1977, “Formulation and estimation of stochastic Frontier production Function models”, Journal of Econometrics 6, 21-37.
• AL-JARRAH, I. and MOLYNEUX, P. (2003), “Cost Efficiency, Scale Elasticity and Scale Economies in Arabian Banking” paper presented in 10th Annual Conference of Economic Research Form For the Arab Countries, Iran and Turkey in Morroco 16-18 December 2003.
• ALLEN, L. and RAI A., 1996 “Operational Efficiency in banking: An international comparison”, Journal of banking and finance 20, 655-672.
• BATTESE, G.E. and COELLI, T.J. (1993), “A stochastic frontier production incorporating a model for technical inefficiency effects”, Working Papers in Applied Statistics, No. 65, Department of Economics, University of New England, NSW, Australia.
• BATTESE, G.E. and COELLI, T.J. (1995), "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics 20(2), 325-32.
• BATTESE, G.E. and COELLI, T.J. (1996), "Identification of Factors Which Influence The Technical Inefficiency Of Indian Farmers," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society 40(02).
• BASHIR, A.H. M., (1999), “Risk and Profitability Measures in Islamic Banks: The Case of Two Sudanese Banks,” Islamic Economic Studies 6, 1–24.
• BAUER, P.W., BERGER, A.N., FERRIER, G.D. and HUMPHREY, D.B. (1998), "Consistency Conditions for Regulatory Analysis of Financial Institutions: A Comparison of Frontier Efficiency Methods," Journal of Economics and Business 50(2), 85-114.
• BERGER, A.N. and HUMPHREY D.B. (1997), “Efficiency of financial institutions: International Survey and Directions for Future Research”, European Journal of Operational Research 98, 175-212.
• BERGER, A. N. and MESTER L. (1997), “Inside the black box: What explains differences in the efficiencies of financial institutions?”, Journal of Banking and Finance 21, 895-947.
• BERGER, A., HUNTER W., TIMME S. (1993), “The Efficiency of Financial Institutions: A Review and Preview of Research Past, Present, and Future”, Journal of Banking and Finance 17(2-3), 221 249.
• BONIN, J., HASAN I. and WACHTEL P. (2005), “Bank performance, efficiency and ownership in transition countries”, Journal of banking and finance 29(1), 2031-53.
• CHAPRA, M. U. (2000), “Why Has Islam Prohibited Interest? Rationale Behind the Prohibition of Interest”, Review of Islamic Economics, 9, 5–20.
• COELLI, T. (1996), “A guide to Frontier Version 4.1: A computer program for stochastic Frontier production and cost function estimation”, CEPA Working paper.
• CEBENOYAN, S., COOPERMAN, E. and CHARLES, R. (1993). "Firm Efficiency and the Regulatory Closure of S & Ls: An Empirical Investigation", The Review of Economics and Statistics 75, 540-545.
• CIHAJK, M. and HESSE, H. (2008), "Islamic Banks and Financial Stability: An Empirical Analysis," IMF Working Papers 08/16, International Monetary Fund.
• DAR, H. (2003), Handbook of International Banking, Edward Elgar, chap. 8.
• DIETSCH, M. and LOZANO-VIVAS A. (2000), “How the environment determines banking efficiency: A comparison between French and Spanish industries”, Journal of banking and Finance 24(6), 985-1004.
• ENGLISH, M., GROSSKOPF, S., HAYES K. and YAISAWARNG S. (1993), “Output allocative and technical efficiency of banks”, Journal of banking and Finance 17(2-3), 349-366.
• FARRELL, M.J. (1957), “The Measurement of Productive Efficiency”, Journal of the Royal Statistical Society 120(3), 253-290.
• FREI, F. X., HARKER P.T., HUNTER L.W. (2000), Performance of Financial Institutions, Cambridge University Press.
• FRIES S. and TACI, A. (2005), “Cost-efficiency of bank in transition countries: Evidence of 289 banks of 15 post-communist countries”, Journal of banking and finance 29(1), 55-81.
• GRENNE, W.H. (1990), “A gamma distributed stochastic Frontier Model”, Journal of Econometrics 46, 141-163.
• HARKER, P. and STRAVOS, Z. (2000), Performance of Financial Institutions: Efficiency, Innovation, Regulation”, Cambridge University Press.
• HASAN, Z. (2005), “Islamic Banking at the Crossroads: Theory versus Practice”, in “Islamic Perspectives on Wealth Creation” edited by M. Iqbal M. and R. Wilson, Edinburgh University Press, UK pp. 3-20.
• HASAN, I., LOZANO-VIVAS A. and PASTOR J., 2000, “Cross-border performance in European Banking”, Bank of Finland Discussion Papers 24.
• HASSAN, M. K. (2003), Textbook on Islamic Banking, Dhaka, Bangladesh: Islamic Economic Research Bureau.
• HUSSEIN, K. (2004), “Banking Efficiency in Bahrein: Islamic vs. Conventional Banks”, Islamic Development Bank, Islamic Research and Training Institute, Research Paper n° 68.
• JONDROW, J., C.A. KNOX LOVELL, I.S. MATEROV and P. SCHMIDT (1982), “On the estimation of technical inefficiency in the stochastic frontier production function model”, Journal of Econometrics 19 (2-3), 233-238.
• ISIK, I. and M.K. HASSAN, (2002), “Technical, scale and allocative efficiencies of Turkish banking industry”, Journal of Banking and Finance 26, 719-766.
• JOBST, A. (2007), “The Economics of Islamic Finance and Securitization”, IMF Working Paper No. 07/117 (Washington: International Monetary Fund).
• JONDROW, J., K. LOVELL, I. MATEROV, and P. SCHMIDT (1982), “On the estimation of technical efficiency in the stochastic Frontier Production Function Model”, Journal of Econometrics 19, 233-238.
• KADER, J.M., A.J. ASAPORTA, and AL-MAGHAIREH, A. (2007), “Comparative Financial Performance of Islamic Banks vis-à-vis Conventional Banks in the UAE.”, Proceeding on Annual Student Research Symposium and the Chancellor’s Undergraduate Research Award, http://sra.uaeu.ac.ae/CURA/Proceedings.
• KHAN, M. (1986), “Islamic Interest-Free Banking,” IMF Staff Papers 33, 1–27.
• KHAN, M., and A. MIRAKHOR (1991), “Islamic Banking,” IMF Working Paper No. 91/88 (Washington: International Monetary Fund).
• LEIGTHNER, J., and K., LOVELL, (1998), “The impact of financial liberalization on the performance of Thai banks”, Journal of Economics and Business 50 (2), 115-131.
• MESTER, L.J., (2007), "Some thoughts on the evolution of the banking system and the process of financial intermediation," Economic Review 1(2), 67 – 75.
• MOKTAR, H.S., N. ABDULLAH and S.M. AL-HABSHI (2006), “Efficiency of Islamic Banks in Malaysia: A Stochastic Frontier Approach,” Journal of Economic Cooperation among Islamic Countries 27 (2), 37–70.
• ROGERS, K.E. (1998), "The non traditional activities and the efficiency of US commercial banks", Journal of banking and Finance 22, 467-482.
• SAMAD, A. (2004), “Bahrain Commercial Bank’s Performance during 1994-2001”, Credit and Financial Management Review 10 (1), 33-40.
• SAMAD, A. and M.K. HASSAN (2000), “Performance of Islamic Bank during 1984-1997: An exploratory study.” Thought on Economics 10 (1), 7-26.
• SAMAD, A. (1999), “Relative Performance of Conventional banking vis-à-vis Islamic Bank in Malaysia.” IIUM Journal of Economics and Management 7 (1), 1-25.
• SARKER, M.A. (1999), “Islamic Banking in Bangladesh: Performance, Problems, and Prospects,” International Journal of Islamic Financial Services, 1.
• SOLE, J. (2007), “Introducing Islamic banks into conventional banking system” IMF Working Paper N° 07/175.
• STEVENSON, R. (1980), “Measuring Technological Bias”, American Economics Review, 162-173.
• SUFIAN, F. (2007), "The efficiency of Islamic banking industry in Malaysia: Foreign vs domestic banks," Humanomics: The International Journal of Systems and Ethics 23(3), 174-192.
• SUNDARARAJAN, V. and L. ERRICO (2002), “Islamic Financial Institutions and Products in the Global Financial System: Key Issues in Risk Management and Challenges Ahead,” IMF Working Paper No. 02/192 (Washington: International Monetary Fund).
• YUDISTIRA, D. (2004), “Efficiency in Islamic Banking: An Empirical Analysis of Eighteen Banks,” Islamic Economic Studies 12 (1), 1–19.
Available Versions of this Item
Efficiency of Islamic and Conventional Banks in Countries with Islamic Banking. (deposited UNSPECIFIED)
- Efficiency of islamic and conventional banks in countries with islamic banking. (deposited 23. Aug 2011 13:34) [Currently Displayed]