Article: The efficiency of Islamic banks: empirical evidence from the Asian countries| Islamic banking sectors Journal: Journal for International Business and Entrepreneurship Development (JIBED) 2010 Vol.5 No.2 pp.154 - 166 Abstract: The paper investigates the efficiency of the Islamic banking sectors in four Asian countries during the period of 2001-2006. The efficiency estimates of individual banks are evaluated using the non-parametric data envelopment analysis (DEA) method. The results suggest that the Asian Islamic banks have exhibited mean technical efficiency highest of 86.5% at 2004 during study period suggesting mean input waste of 13.5%. This implies that the Islamic banks in the Asian countries could have produced the same amount of outputs by only using 86.5% of the amount of inputs they employed. The empirical findings suggest that during the period of study, pure technical inefficiency outweighs scale inefficiency in Asian countries banking sectors. Overall the results imply that during the period of study, although the Asian Islamic banking sectors have been operating at a relatively optimal scale of operations, they were relatively managerially inefficient in controlling their operating costs and utilising their resources to the fullest. Inderscience Publishers - linking academia, business and industry through research

Title: The efficiency of Islamic banks: empirical evidence from the Asian countries' Islamic banking sectors

Authors: Nor Hayati bt Ahmad, Mohamad Akbar Noor Mohamad Noor, Fadzlan Sufian

Addresses: College of Business, Universiti Utara Malaysia, 06010 Sintok, Kedah, Malaysia. ' College of Business, Universiti Utara Malaysia, 06010 Sintok, Kedah, Malaysia. ' Khazanah Research & Investment Strategy, Khazanah Nasional Berhad, Aras 33, Menara 2, Menara Berkembar Petronas, Kuala Lumpur City Centre, 50088 Kuala Lumpur, Malaysia; Faculty of Economics & Management, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia

Abstract: The paper investigates the efficiency of the Islamic banking sectors in four Asian countries during the period of 2001-2006. The efficiency estimates of individual banks are evaluated using the non-parametric data envelopment analysis (DEA) method. The results suggest that the Asian Islamic banks have exhibited mean technical efficiency highest of 86.5% at 2004 during study period suggesting mean input waste of 13.5%. This implies that the Islamic banks in the Asian countries could have produced the same amount of outputs by only using 86.5% of the amount of inputs they employed. The empirical findings suggest that during the period of study, pure technical inefficiency outweighs scale inefficiency in Asian countries banking sectors. Overall the results imply that during the period of study, although the Asian Islamic banking sectors have been operating at a relatively optimal scale of operations, they were relatively managerially inefficient in controlling their operating costs and utilising their resources to the fullest.

Keywords: Islamic banking; data envelopment analysis; DEA; Asia; bank efficiency; Asian banks.

DOI: 10.1504/JIBED.2010.036999

Journal for International Business and Entrepreneurship Development, 2010 Vol.5 No.2, pp.154 - 166

Published online: 20 Nov 2010 *

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Title: The efficiency of Islamic banks: empirical evidence from the Asian countries' Islamic banking sectors

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