Technical Efficiency of Islamic Banks versus Domestic Banks: Evidence from Bangladesh

The International Journal of Business and Finance Research, v. 10 (2) p. 31-40, 2016

10 Pages Posted: 5 Sep 2016

Multiple version iconThere are 3 versions of this paper

Date Written: 2016

Abstract

This paper empirically estimates the technical efficiencies (TE) of Islamic banks compared to conventional banks in deposit mobilizations and loans production for 2010. This analysis uses the stochastic frontier production function. Estimates of the mean TE of Islamic banks and conventional banks for loans are 59.6 percent and 62.8 percent respectively, and for deposits are 0.61 and 0.60 respectively. Parametric tests, test, Satterthwaite-Welch t-test, Anova F-test, and Walch F-test, indicate no statistical evidence of significant differences between the TE of Islamic and conventional banks. The competitive market structure for loans and deposits markets, evidenced by the Herfindahl-Hirschman Index of less than 400, provides an explanation for the equality of mean TE between Islamic and conventional banks.

Keywords: Efficiency, Foreign Bank, Domestic Bank, Stochastic Frontier

JEL Classification: G20, G21, C33

Suggested Citation

Samad, Abdus, Technical Efficiency of Islamic Banks versus Domestic Banks: Evidence from Bangladesh (2016). The International Journal of Business and Finance Research, v. 10 (2) p. 31-40, 2016, Available at SSRN: https://ssrn.com/abstract=2798340

Abdus Samad (Contact Author)

Utah Valley University ( email )

800 West University Parkway
Orem, UT 84058
United States

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