Non-Parametric Scrutiny of Efficiency of Islamic Banking Industry in Pakistan: A Data Envelopment Analysis

  • Nasrallah Aziz
Keywords: Islamic Banking, Total Factor Productivity, Data Envelopment Analysis, Malmquist Index.

Abstract

Non-Parametric Scrutiny of Efficiency of Islamic Banking Industry in Pakistan: A Data Envelopment Analysis

This paper investigates the efficiency of Islamic Banking in Pakistan. A sample of nine banks operating in Pakistan including five full-fledge Islamic Banks and four Islamic Windows of conventional banks have been subjected to data envelopment analysis (DEA). Data span is of five years from year 2007 to 2011. Technical efficiency, allocative efficiency, scale efficiency and TFP scores have been calculated using DEA. Empirical results reveal that six banks were found efficient in year 2007, eight in 2008, seven in 2009, five in 2010 and six in 2011 under CRS. Total factor productivity of the Islamic banking sector has increased in the period under review, whereas change in total factor productivity was mainly contributed by the technological change instead of technical efficiency change. 

Published
2016-11-16