Efficiency of the Islamic Banking Sector: Evidence from Two-Stage DEA Double Frontiers Analysis

Xuan Thi Thanh Mai, Ha Thi Nhu Nguyen, Thanh Ngo, Tu D. Q. Le () and Lien Phuong Nguyen
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Xuan Thi Thanh Mai: University of Economics & Business, Vietnam National University, Hanoi 10000, Vietnam
Ha Thi Nhu Nguyen: Ho Chi Minh National Academy of Politics, Hanoi 10000, Vietnam
Tu D. Q. Le: Institute for Development and Research in Banking Technology, University of Economics and Law, Ho Chi Minh City 700000, Vietnam
Lien Phuong Nguyen: Hanoi University, Hanoi 10000, Vietnam

IJFS, 2023, vol. 11, issue 1, 1-14

Abstract: This paper examines the multi-dimensional efficiency of the Islamic banking sector and its determinants, including the impacts of the COVID-19 pandemic. To do that, we use a novel approach of two-stage data envelopment analysis (DEA) double frontiers to evaluate the overall efficiency of 79 Islamic banks across 16 countries (2005–2020). In the first-stage analysis, we found that the Islamic banking sector experienced an increasing trend in its efficiency and performance, even during the recent pandemic, although it varied across banks and countries. Our empirical results of the second-stage analysis further showed that economic development can help countries both withstand the recent pandemic and improve the efficiency and performance of their (Islamic) banking system. This, in turn, could help speed up the recovery process of the global economy. Since there is evidence that the Islamic banking sector is resilient to the COVID-19 pandemic, it is expected that this sector will be a driving force of such recovery.

Keywords: two-stage DEA double frontiers; Islamic banks; COVID-19; efficiency; determinants (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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