Journal of Applied Finance & Banking

The Impact of Bank Characteristics on the Efficiency: Evidence from MENA Islamic Banks

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  • Abstract

    Islamic banking has experienced over the past two decades spectacular growth. Numerous researches, using non-parametric frontier methods, demonstrated that Islamic banks are more efficient than their conventional counterparts. This study aims at analyzing the efficiency Islamic banks by using the non-parametric data envelopment analysis (DEA), to estimate five efficiency scores for each bank, and to study the impact of the banking characteristics on efficiency scores. Based on a sample of Islamic banks in the MENA region over the period 2005-2009, we have shown that the dominant source of overall inefficiency of these banks is organizational (technical inefficiency) rather than regulatory (allocative inefficiency). Through a panel methodology, we also demonstrated that internal factors of Islamic banks contribute significantly to the evolution of the economic efficiency of MENA Islamic banks.