Efficiency in Islamic and conventional banks : A comparison based on financial ratios and data envelopment analysis
By: Jill Johnes & Marwan Izzeldin & Vasileios Pappas
EM Strasbourg Bussiness School
(Université de Strasbourg)
with
European Research Group
“Money, Banking & Finance”
Financial and Monetary European Integration Group
Workshop on Islamic Finance
in Strasbourg
What Islamic Finance does (not) change
March 17th,, 2010,, EM Strasbourg Business School
Abstract:
We examine e¢ ciency in Islamic and conventional banks in the GCC
region (2004-2007) using .nancial ratio analysis (FRA) and data envelop-
ment analysis (DEA). From the FRA, Islamic banks are less cost e¢ cient
but more revenue and pro.t e¢ cient than conventional banks. Bootstrap-
ping con.rms these small sample results. From the DEA, average e¢ ciency
is signi.cantly lower in Islamic than conventional banks. A decomposition
method new to the banking context shows that the e¢ ciency di¤erence is
more a consequence operating under Islamic rules than of managerial in-
adequacies. Productivity growth has been slight, and is caused mainly by
positive technology change.
Keywords: Banking sector, E¢ ciency, Data Envelopment Analysis,
Financial ratio analysis, Gulf region
source: http://www.em-strasbourg.eu/ems/ems-workshop-on-islamic-finance-33.html