TECHNICAL EFFICIENCY OF ISLAMIC BANKS VERSUS DOMESTIC BANKS: EVIDENCE FROM BANGLADESH

Abdus Samad

The International Journal of Business and Finance Research, 2016, vol. 10, issue 2, 31-40

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 (search for similar items in EconPapers)
JEL-codes: C33 G20 G21 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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