Research Paper
MP A R
Munich Personal RePEc Archive
Assessing production efficiency of Islamic banks and conventional bank Islamic windows in Malaysia
Kamaruddin, Badrul Hisham; Safa, Mohammad Samaun and Mohd, Rohani MARA University of Technology
08. March 2008
Online at http://mpra.ub.uni-muenchen.de/10670/ MPRA Paper No. 10670, posted 21. September 2008 / 16:23
Assessing Production Efficiency of Islamic Banks in Malaysia
ISSN 1985-3599
Research paper
Received 07 March’08/Accepted 10 May’08
Assessing Production Efficiency of Islamic Banks and Conventional Bank Islamic Windows in Malaysia
♣
Badrul Hisham Kamaruddina Mohammad Samaun Safab, Rohani Mohdc abcFaculty of Business Management, University Technology MARA, Malaysia
Abstract This study presents new perspectives on performance evaluation of Islamic banking operations in Malaysia, by investigating for the first time, both cost and profit efficiency of full-fledged Islamic banks and Islamic window operations of domestic and foreign banks. The application of Data Envelopment Analysis (DEA) technique has provided several efficiency measures such as allocative, pure technical and scale efficiency that explain cost and profit efficiency differentials among banks. The findings of the study show that Islamic banking operators are relatively more efficient at controlling costs than at generating profits. The main contributor for cost efficiency of domestic and foreign banks comes from resource management and economies of scale respectively. These findings have implications on the reform process carried out in the aftermath of Asian financial crisis, particularly the Financial Sector Master Plan (FSMP). Keyword Data Envelopment Analysis, allocative efficiency, technical efficiency, foreign banks
INTRODUCTION Interest-free banking is growing in Malaysia very quickly and widely accepted by the public, standing at an average rate of 19 percent per annum in terms of assets since 2000. By the end of
Munich Personal RePEc Archive
Assessing production efficiency of Islamic banks and conventional bank Islamic windows in Malaysia
Kamaruddin, Badrul Hisham; Safa, Mohammad Samaun and Mohd, Rohani MARA University of Technology
08. March 2008
Online at http://mpra.ub.uni-muenchen.de/10670/ MPRA Paper No. 10670, posted 21. September 2008 / 16:23
Assessing Production Efficiency of Islamic Banks in Malaysia
ISSN 1985-3599
Research paper
Received 07 March’08/Accepted 10 May’08
Assessing Production Efficiency of Islamic Banks and Conventional Bank Islamic Windows in Malaysia
♣
Badrul Hisham Kamaruddina Mohammad Samaun Safab, Rohani Mohdc abcFaculty of Business Management, University Technology MARA, Malaysia
Abstract This study presents new perspectives on performance evaluation of Islamic banking operations in Malaysia, by investigating for the first time, both cost and profit efficiency of full-fledged Islamic banks and Islamic window operations of domestic and foreign banks. The application of Data Envelopment Analysis (DEA) technique has provided several efficiency measures such as allocative, pure technical and scale efficiency that explain cost and profit efficiency differentials among banks. The findings of the study show that Islamic banking operators are relatively more efficient at controlling costs than at generating profits. The main contributor for cost efficiency of domestic and foreign banks comes from resource management and economies of scale respectively. These findings have implications on the reform process carried out in the aftermath of Asian financial crisis, particularly the Financial Sector Master Plan (FSMP). Keyword Data Envelopment Analysis, allocative efficiency, technical efficiency, foreign banks
INTRODUCTION Interest-free banking is growing in Malaysia very quickly and widely accepted by the public, standing at an average rate of 19 percent per annum in terms of assets since 2000. By the end of
References: International Journal of Business and Management Research, 1(1): 31-48, 2008 44 International Journal of Business and Management Research, 1(1): 31-48, 2008 45 International Journal of Business and Management Research, 1(1): 31-48, 2008 46 International Journal of Business and Management Research, 1(1): 31-48, 2008 47 International Journal of Business and Management Research, 1(1): 31-48, 2008 48