Examining the Comparative Efficiency of GCC Islamic Banking
January 30th, 2021
By Dr. Mehboob ul Hassan, Md Fouad Bin Amin, Imran Khokhar & Muhammad Nauman Khan
Purpose – This study examines the
performance of GCC Islamic banking in terms of technical and scale efficiency
for the period 2010-2019 at country as well as individual bank level.
Design/methodology/approach –It uses data
envelopment analysis (DEA) approach to measure the performance of Islamic
banking industry of GCC, where the banks are considered as intermediation firms
that transform the input into outputs. The study examines the performance of
Islamic banking at country as well as individual bank levels.
Findings–Islamic banking of Oman and UAE are the
most and least efficient respectively. Islamic banking in Bahrain became the
second top performing industry while Kuwaiti Islamic banking industry stands at
second least performer.
Practical implications – The study suggest that there
is room for improving the managerial and
operational policies in UAE Islamic banking industry to achieve efficiency.
Moreover, Qatar and Bahrain can save some portion of their inputs by increasing
their respective banking operations to an optimum scale. Some banks like Dubai Islamic Bank, Abu Dhabi Islamic Bank,
Sharjah Islamic Bank, Kuwait International Bank and Emirates Islamic Bank need
to increase their overall technical efficiencies. Besides, other banks like Nizwa,
Boubyan, Kuwait International, Sharjah Islamic and Emirates Islamic need to
emphasis on pure technical efficiencies, and lastly Abu Dhabi Islamic, Kuwait
International, Dubai Islamic, Nizwa and Albilad bank require paying attention
to scale efficiencies.
Originality – The study is significant because
it gives many interesting insights about the GCC Islamic banking industry and
evaluates the efficiency of the Islamic banking at industry and individual bank
levels. It uses the recent available data and applies DEA techniques that is
one of the reliable techniques for such measurement.