Investigating the Efficiency of GCC Banking Sector: An Empirical Comparison of Islamic and Conventional Banks
We examine and compare the performance of 63 (21 Islamic and 42 conventional) GCC banks at two tiers, covering the period of 2010 2016. In the first tier, an industry level analysis is conducted of each country, followed by an individual bank level analysis in the second tier. Deposits, assets, and capital are taken as inputs to measure the outputs using data envelopment analysis techniques. At the industry level, we find that Islamic banking is at par with if not better than conventional banking in all terms of efficiency. Particularly, banking in Bahrain and KSA is among the best, whereas there is no scope for improvement in the UAE’s banking industry. This low performance could be attributed to a lack of standardization in products and schemes as well as the level of prudence in decision making, governance, and operations. At the bank level, many Islamic banks perform even better than conventional banks. Most studies on GCC and MENA focus on the determinants and indicators of development and the banking industry growth in general. Uniquely, we further examine GCC banking performance at the individual bank level by incorporating the latest available data.
We examine and compare the performance of 63 (21 Islamic and 42 conventional) GCC banks at two tiers, covering the period of 2010 2016. In the first tier, an industry level analysis is conducted…
Saudi Arabia, beside Malaysia and many other Muslim countries, is one of those countries where Islamic and conventional banking operate in parallel. Over the last decade, the country’s banking…