Digital Cashless Payments and Economic Growth: Evidence from CPMI Countries

Noor Shazreen Mortadza and Rossazana Ab-Rahim ()
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Noor Shazreen Mortadza: Faculty of Economics and Business, Universiti Malaysia Sarawak, Malaysia.
Rossazana Ab-Rahim: Faculty of Economics and Business, Universiti Malaysia Sarawak, Malaysia.

Capital Markets Review, 2022, vol. 30, issue 2, 91-106

Abstract: Research Question: Theoretically, the rapid growth of the banking sector fosters competition and eventually competition influences the efficiency performance of the banks. The issue that we would like to highlight, whether efficiency and competition are interrelated in the QISMUT banking sector. Motivation: In the context of QISMUT, these countries recorded 80 percent of shares of the global Islamic banking industry (Ernst and Young, 2014). Due to the rapid growth of Islamic banks in QISMUT, it is important for them to operate efficiently in their performance to compete with conventional banks. Hence, this study aims to assess the nexus of efficiency and competition of QISMUT (Qatar, Indonesia, Saudi Arabia, Malaysia, United Arab Emirates and Turkey) banking sector. Interestingly, there is no study related to investigating the nexus of efficiency and competition of the QISMUT banking sector. Idea: Competition and efficiency are important as it is reflecting the performance of the banking sector. Since competition causes the banks to perform better in terms of efficiency. It can be seen that there is a relationship between competition and efficiency. Data: The period of the data is from 2006 to 2016. It consists of 60 conventional and 32 Islamic banks. Method/Tools: The measurement to measure the efficiency is Data Envelopment Analysis (DEA) whilst for the competition, Lerner Index is used. In order to test the relationship between competition and efficiency, the Generalized Method of Moments (GMM) is employed due to its advantages such as overcoming the endogeneity problem. Findings: The findings indicate Islamic banks are more efficient than conventional banks in QISMUT. The results also show there is an insignificant competition-efficiency whereas efficiency-competition is significant for the conventional banking sector in QISMUT. The results imply that the banking authorities should monitor the conventional banking sector as the finding shows a high concentration compared to Islamic because these countries aim to become an Islamic international financial hub. Contributions: This study contributes to the new evidence of QISMUT banking sector regards on efficiency, competition and the impact of banks-specific variables.

Keywords: Competition; efficiency; Islamic banks; conventional; banking. (search for similar items in EconPapers)
Date: 2022
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