Cost, Revenue, and Profit Efficiency of Islamic Versus Conventional Banks

Cost, Revenue, and Profit Efficiency of Islamic Versus Conventional Banks
Author: Mohammed Khaled I. Bader
Publisher:
Total Pages: 54
Release: 2018
Genre:
ISBN:
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This paper measures and compares the cost, revenue and profit efficiency of 43 Islamic and 37 conventional banks over the period 1990-2005 in 21 countries using Data Envelopment Analysis. It assesses the average and overtime efficiency of those banks based on their size, age, and region using static and dynamic panels. The findings suggest that there are no significant differences between the overall efficiency results of conventional versus Islamic banks. Overall, the results in this paper are favorable with the 'new' banking system.

Efficiency of Conventional Versus Islamic Banks

Efficiency of Conventional Versus Islamic Banks
Author: Mohammed Bader
Publisher: LAP Lambert Academic Publishing
Total Pages: 300
Release: 2012
Genre:
ISBN: 9783847337966
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Conventional and Islamic banks operate on different principles in maximizing the wealth of their shareholders and are subjected to the competitive regulatory environment. The cost, revenue, and profit efficiencies of Islamic banks and conventional banks are analyzed based on size, age, and region. The average and over-time efficiency for these banks are analyzed using Data Envelopment Analysis (DEA) and Financial Ratios. Overall cost and profit efficiencies are ascertained using the Stochastic Frontier Approach (SFA). The findings suggest that there are no significant differences between the overall efficiency results of conventional and Islamic banks irrespective of the method of analysis. Based on the documented evidence on efficiency of conventional banks, these findings imply that the banking transactions compliant with the Shari'ah are not an impediment to efficiency of Islamic banks. However, there is a substantial avenue to further improve the cost, revenue and profit efficiencies in both the banking systems. Overall, the results on the efficiency of conventional and Islamic banks are consistent with the documented literature.

Comparative Efficiency Study Between Islamic and Traditional Banks

Comparative Efficiency Study Between Islamic and Traditional Banks
Author: Mohamed H. Rashwan
Publisher:
Total Pages: 25
Release: 2016
Genre:
ISBN:
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Islamic banking caught attention due to its resilience to the significant shocks that hit the economy in late 2008. This research aims to evaluate the efficiency of a sample of 66 banks including both Islamic and traditional banks in various countries ranging from Egypt, Pakistan, Bangladesh, Saudi Arabia, Kuwait, Qatar, Iraq, Emirates, Sudan, Turkey, Bahrain and Jordan throughout 2009-2014. This research aims at identifying which banking regime proves to be more efficient and its significance using Financial Ratio Analysis (FRA), composed of cost efficiency, revenue efficiency and profit efficiency ratios along with the One-way ANOVA test. The impact of efficiency of the performance of the banks in terms of Return on Assets (ROA) and Return on Equity (ROE) is also evaluated through multiple regression analysis. Lastly, inflation's effect on the different banking efficiency measures will be tested using regression analysis. The findings indicate that the traditional banking system is superior in terms of cost, revenue and profit efficiencies, furthermore, the results of the multiple regression analysis on the banks' return on assets and return on equity imply that the efficiency of Islamic banks have more influence on their profitability compared to their traditional counterparts. Inflation had minimal effect on the efficiency of both banking system. The overall results imply the superiority of traditional banks to the relatively new banking system.

The Foundations of Islamic Banking

The Foundations of Islamic Banking
Author: Mohamed Ariff
Publisher: Edward Elgar Publishing
Total Pages: 297
Release: 2011-01-01
Genre: Business & Economics
ISBN: 1849807930
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After barely half a century of experience, Islamic banking has become established as a new niche industry across the world offering new and sophisticated financial products designed to be compliant with the principles of Islamic legal principles and common law. This comprehensive book explores the theory, principles and practices underpinning this rapidly expanding sector of banking. Expert contributors ¿ including eminent scholars and senior practitioners in the field ¿ examine the roots of the principles of ethical Islamic financial transactions, which have evolved over several millennia, on issuesincluding usury, interest rates, financial contracting for funding enterprises, for mortgages, for leasing and other financial transactions. Regulatory and governance issues are discussed, and the practice and operation of Islamicfinancial institutions are explained via three distinct case studies. Importantly, the final chapter looks at what steps are being taken to provide professional accreditation to Islamic banking professional personnel, and prescribes requirements for training in this growing industry.

Efficiency in Islamic and Conventional Banks

Efficiency in Islamic and Conventional Banks
Author: Jill Johnes
Publisher:
Total Pages: 36
Release: 2014
Genre:
ISBN:
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We examine efficiency in Islamic and conventional banking systems in the Gulf Cooperation Council (GCC) region (2004-2007) using financial ratio analysis (FRA) and data envelopment analysis (DEA). We find the two approaches are complementary in terms of the information they provide. From the FRA, the Islamic banking system is less cost efficient but more revenue and profit efficient than the conventional one. Bootstrapped tests confirm that these differences are significant. From the DEA, average efficiency is significantly lower in Islamic than conventional banks. A decomposition of the DEA efficiencies demonstrates that the efficiency difference is more a consequence operating under Islamic rules (i.e. the banking system itself) rather than of managerial inadequacies. Productivity growth has been slight, and can be attributed to the sluggish adaptation of inefficient banks to technological advancements.

Quantitative Models for Performance Evaluation and Benchmarking

Quantitative Models for Performance Evaluation and Benchmarking
Author: Joe Zhu
Publisher: Springer
Total Pages: 419
Release: 2014-09-11
Genre: Business & Economics
ISBN: 3319066471
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The author is one of the prominent researchers in the field of Data Envelopment Analysis (DEA), a powerful data analysis tool that can be used in performance evaluation and benchmarking. This book is based upon the author’s years of research and teaching experiences. It is difficult to evaluate an organization’s performance when multiple performance metrics are present. The difficulties are further enhanced when the relationships among the performance metrics are complex and involve unknown tradeoffs. This book introduces Data Envelopment Analysis (DEA) as a multiple-measure performance evaluation and benchmarking tool. The focus of performance evaluation and benchmarking is shifted from characterizing performance in terms of single measures to evaluating performance as a multidimensional systems perspective. Conventional and new DEA approaches are presented and discussed using Excel spreadsheets — one of the most effective ways to analyze and evaluate decision alternatives. The user can easily develop and customize new DEA models based upon these spreadsheets. DEA models and approaches are presented to deal with performance evaluation problems in a variety of contexts. For example, a context-dependent DEA measures the relative attractiveness of similar operations/processes/products. Sensitivity analysis techniques can be easily applied, and used to identify critical performance measures. Two-stage network efficiency models can be utilized to study performance of supply chain. DEA benchmarking models extend DEA’s ability in performance evaluation. Various cross efficiency approaches are presented to provide peer evaluation scores. This book also provides an easy-to-use DEA software — DEAFrontier. This DEAFrontier is an Add-In for Microsoft® Excel and provides a custom menu of DEA approaches. This version of DEAFrontier is for use with Excel 97-2013 under Windows and can solve up to 50 DMUs, subject to the capacity of Excel Solver. It is an extremely powerful tool that can assist decision-makers in benchmarking and analyzing complex operational performance issues in manufacturing organizations as well as evaluating processes in banking, retail, franchising, health care, public services and many other industries.

The Performance of Islamic Versus Conventional Banks

The Performance of Islamic Versus Conventional Banks
Author: Mona Mohammad-Toufic Omeiche
Publisher:
Total Pages: 108
Release: 2010
Genre:
ISBN:
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From the onset of Islamic banking operations, practitioners and individuals pondered on whether Islamic banks are more profitable than their conventional peers, and if yes, why. The thesis aims at identifying the internal determinants (proxied by financial ratios) and external determinants (proxied by country macroeconomic indicators) that can influence bank performance for a sample of 41 Islamic and 132 conventional banks in the Middle East region during the period 2001-2008. The study examines whether Islamic banks are more profitable than their peers and whether more specifically GCC Islamic banks are more profitable than their peers. It tests for the size effect on banks profitability and whether Islamic and conventional banks have similar internal and external characteristics.--Our sample results indicate that Islamic banks were more profitable and more capitalized, but less cost efficient than conventional banks. The regression results indicate that Islamic banks' profitability is positively related to GDP growth rate, while those of conventional banks do not suggest a significant relation between any of the studied macroeconomic indicators and the profitability of conventional banks. --When comparing Islamic banks across the Middle East region, Islamic banks operating in the GCC area were more profitable than their peers in other Arab countries, and that larger Islamic banks were more successful than smaller banks. Finally, we show that Islamic and conventional banks do not have similar internal characteristics.

Islamic Banking and Finance

Islamic Banking and Finance
Author: Mondher Bellalah
Publisher: Cambridge Scholars Publishing
Total Pages: 295
Release: 2013-07-16
Genre: Business & Economics
ISBN: 1443849995
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Islamic finance is founded on principles that constitute the guidelines governing any Islamic economic or financial dealings. Innovative financial engineering today constitutes one of the most critical needs of Islamic financial institutions. It represents the forces that will drive Islamic finance toward continuous growth and efficiency. The structuring of new financing and Shariah-complaint instruments plays an important role in the enhancement of Islamic financial markets, and Islamic risk management practices, combining basic Shariah-complaint financial instruments within Shariah structures to precise identified needs. The financial engineering process in Islamic finance is a process that is very sensitive and complex. It requires multidisciplinary considerations, involving deep knowledge of finance, economy, Shariah law and commercial law. Divergence of opinions among different Shariah scholars and boards, as well as the absence or lack of effectiveness of a central regulatory body, is perceived as an obstacle to the growth of investment confidence in Islamic finance. Hence, innovation, along with greater uniformity, is essential to make Islamic finance an international financial system and to attract a greater number of customers. This book addresses the main issues of concern within Islamic banking, namely the development of conceptual framework, the viability of interest-free banking, and the assessment of its performance and future. In a world where conventional interest-based finance is the dominant framework, Islamic banking faces many challenges that must be addressed. This book discusses these issues and challenges and will be of great interest to both researchers and practitioners. It analyses the past experiences of Islamic banks worldwide, and provides an objective assessment of their successes and failures.