How Large Are Productivity Differences Between Islamic and Conventional Banks?

Ahmad, Wahida; Prentice, David

doi:10.1142/s0217590819500656

Cited by 4 publications

(6 citation statements)

References 25 publications

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“…Within the non-parametric approach, DEA, which is an efficiency frontier technique, is broadly used to measure banking performance (Alam et al, 2021). For instance, DEA was applied to examine the efficiency of British commercial banks (Ouenniche & Carrales, 2018), banks in the USA (Kwon and Lee, 2015), and worldwide banking efficiency (Ahmad & Prentice, 2019;An et al, 2019;Banya & Biekpe, 2018;Chowdhury & Haron, 2021;Henriques et al, 2018;Kamarudin et al, 2019;Tamatam et al, 2019).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Malaysia, like any other Muslim country, with the exception of Iran and Somalia, operates a dual banking system (Nugrohowati et al, 2020), i.e., Islamic and conventional (Ahmad & Prentice, 2019). In relation to Islamic banks (IBs), the Organization of Islamic Countries (OIC) established an Islamic bank in 1974, the Islamic Development Bank (IDB) (Cerovic et al, 2017) with the objective to stimulate the economic growth of Islamic countries by supporting Shariah-compliant funds (Cerovic et al, 2017).…”

Section: Introductionmentioning

confidence: 99%

“…The main purpose of this study is to evaluate the Malaysian IBs' efficiency due to several reasons; first, the strong growth of Islamic banking assets experienced over the years; second, the mechanisms of both conventional and Islamic banking differ with regard to the products and services; third, IBs are less productive than conventional banks because of restrictions on operations and business levied on IBs (see, e.g., Ahmad and Prentice, 2019), and finally, many past studies analysed banking efficiency only by certain approach despite banking efficiency should be analysed by various approaches (intermediary, production and operating/profit-oriented), for conclusive findings. Furthermore, there is a scarcity of efficiency studies on Malaysian IBs comparing the full-fledged and conventional-owned IBs as well as between local and foreignowned IBs using the three approaches.…”

Section: Introductionmentioning

confidence: 99%

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The efficiency of Malaysian Islamic banks: Intermediation, production and operating approach

Chowdhury¹,

Haron²

2022

AMBR

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The Malaysian Islamic banking industry holds one of the top three market shares for global Islamic banking assets. Apparently, a dual banking system involving conventional and full-fledged Islamic banks are currently operating in Malaysia. The main objective of this study is to evaluate and compare the efficiency of conventional-owned Islamic banks and full-fledged Islamic banks using three banking approaches. To achieve this objective, information from the annual reports of 15 Islamic banks were utilised from 2011 to 2018. The findings provided mixed evidence subject to the different approaches of DEA methodology. Full-fledged Islamic banks outperformed conventional-owned Islamic banks in the intermediation approach, while conventional-owned Islamic banks outperformed in the production and operating approaches. The findings provide inputs for banks to increase their competency at the managerial level and for policymakers to sustain the growth momentum of the industry.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The efficiency of Malaysian Islamic banks: Intermediation, production and operating approach

Chowdhury¹,

Haron²

2022

AMBR

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“…Rather giving importance to credit worthiness, Islamic banking extend significance on risk sharing and productivity (Iqbal, Ahmad & Khan 1998). Foundation of Islamic banking business transitions rooted in shariah Law, whereas the conventional banking does not (Mbawuni & Nimako 2017;Nurdin 2016;Rahman 2015). Any banking transactions that disobey the code of shariah will be null and void.…”

Section: Islamic Modes Of Financingmentioning

confidence: 99%

Islamic Banking Implementation: Supportive Role of Business Service

Kumar

Govindarajo

2019

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Islamic banking has advanced in the past four decades. It has become a worldwide brand, cultured and structured industry. Nevertheless, Malaysia has witnessed low penetration of Islamic banking. Researchers documented several reasons allied with low market penetration of Islamic banking. Although Malaysian industrial sector is dominated by Small and Medium Enterprises, there is less information about small business owner's intention to adopt Islamic banking. Following the Theory of Reasoned Action, this research includes attitude, social influence and business service factors effect on intention to adopt Islamic banking. The research followed positivist research philosophy and quantitative descriptive cross-sectional study design to explicate the relationship between small business owner's attitude, social influence and business service on intention to adopt Islamic banking. 390 sample from Klang Valley region of Selangor state of Malaysia was considered for the study. Data was collected using survey method through the distribution of structured questionnaires. PLS-SEM was used to test the predictive relevance. The results indicate a strong positive relationship between attitude, social influence and business service on intention to adopt Islamic banking.

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“…Islamic banks are one of the fastest-growing institutions, growing around the world by providing an alternative system suited to the needs of Muslims but universally accepted. Currently, in more than 50 countries globally, Islamic banks are still operating and competing with conventional banks (Ahmad and Prentice, 2015). Islamic banks stood efficiently in the subprime crisis of 2008 to 2009 in the scene of a significant financial crisis that has plagued the conventional financial system as a whole.…”

Section: Introductionmentioning

confidence: 99%

Non Performing Financing and Efficiency of Islamic Banks in Indonesia

Purwanto

2021

JBSMR

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This research objective is to empirically investigate factors that decisively affect Non Performing Financing (NPF) of Islamic banks partially and simultaneously; the performance of Islamic banks through observing the efficiency by applying Data Envelopment Analysis (DEA) approach; and the intertemporal relationship between NPF and efficiency of Islamic banks by employing VAR model to test the hypothesis of 'Bad Management' and 'Bad Luck'. This research uses purposive sampling method and panel data where data collected from official website of each bank and Bank Indonesia. This study adopts quantitative research and has 72 observations from four banks in five quarterly years. An empirical evidence of this research indicates that partially FDR, ROA, and Exchange rate has negative significant influence towards NPF, while BI rate has the positive significant influence towards NPF. However, CAR and inflation has an insignificant effect to NPF. Simultaneously, all of the independent variables have the significant effect towards NPF which described by the value of 74.92%. The findings of DEA show the average value of Islamic banks in Indonesia is 92.85% which means Islamic Banks in Indonesia are not fully efficient. The finding also indicates that Islamic banks in Indonesia support the “Bad Luck” hypothesis, that the NPF and inefficiency of Islamic banks in Indonesia can be linked to external factors that are beyond management control rather than internal factors.

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How Large Are Productivity Differences Between Islamic and Conventional Banks?

Cited by 4 publications

References 25 publications

The efficiency of Malaysian Islamic banks: Intermediation, production and operating approach

The efficiency of Malaysian Islamic banks: Intermediation, production and operating approach

Islamic Banking Implementation: Supportive Role of Business Service

Non Performing Financing and Efficiency of Islamic Banks in Indonesia

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