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Efficiency and competition of Islamic banking in Malaysia

Efficiency and competition of Islamic banking in Malaysia Purpose – In an attempt to enrich the literature of the efficiency of Islamic banks, this study aims to empirically investigate the efficiency of the fully fledged Islamic banks as well as Islamic windows in Malaysia. Design/methodology/approach – This study measures the technical and cost‐efficiencies of these banks using the non‐parametric frontier method, data envelopment analysis (DEA). Findings – The findings show that, on average, the efficiency of the overall Islamic banking industry has increased during the period of study. The study also revealed that, although the fully fledged Islamic banks were more efficient than the Islamic windows, they were still less efficient than the conventional banks. Finally, Islamic windows of the foreign banks were found to be more efficient than Islamic windows of the domestic banks. Originality/value – The findings of this study will provide some empirical insights as to how these two modes of Islamic banks had fared in the competitive environment from 1997 to 2003. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Humanomics Emerald Publishing

Efficiency and competition of Islamic banking in Malaysia

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References (61)

Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
0828-8666
DOI
10.1108/08288660810851450
Publisher site
See Article on Publisher Site

Abstract

Purpose – In an attempt to enrich the literature of the efficiency of Islamic banks, this study aims to empirically investigate the efficiency of the fully fledged Islamic banks as well as Islamic windows in Malaysia. Design/methodology/approach – This study measures the technical and cost‐efficiencies of these banks using the non‐parametric frontier method, data envelopment analysis (DEA). Findings – The findings show that, on average, the efficiency of the overall Islamic banking industry has increased during the period of study. The study also revealed that, although the fully fledged Islamic banks were more efficient than the Islamic windows, they were still less efficient than the conventional banks. Finally, Islamic windows of the foreign banks were found to be more efficient than Islamic windows of the domestic banks. Originality/value – The findings of this study will provide some empirical insights as to how these two modes of Islamic banks had fared in the competitive environment from 1997 to 2003.

Journal

Humanomics – Emerald Publishing

Published: Feb 22, 2008

Keywords: Banking; Banks; Islam; Malaysia

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