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Efficiency measurement of Islamic and conventional banks in Saudi Arabia:an empirical and comparative analysis

Nauman Khan, Muhammad and Amin, Md Fouad and Khokhar, Imran and Hassan, Mehboob ul and Ahmad, Khaliq (2018) Efficiency measurement of Islamic and conventional banks in Saudi Arabia:an empirical and comparative analysis. Al-Shajarah, Special Issue-2018. pp. 111-134. ISSN 1394-6870

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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 industry is growing at rapid pace that accounts for the largest share in GCC. The present study measures and compares the performance of Saudi conventional and Islamic banking industry and identifies the areas where the strategic measures are required to improve the banking performance. It applies non-parametric Data Envelopment Analysis (DEA) for the data from 2008-2016 of Saudi banking industry and provides comprehensive empirical results at individual bank vis-a-vis industry levels. The empirical results demonstrate a mix trend among the banks in achieving technical, pure technical and scale efficiency. It is observed that with the common pledge to expanding market share and performance, both conventional and Islamic banks have been successful in improving their levels of efficiency. At individual bank level, Al-Rajhi is the only bank that has achieved the highest score in terms of technical, pure technical and scale efficiency, while in the conventional banking group, both Saudi Hollandi and National Commercial banks are found on the top position. Despite the growth of incomes and deposits of entire banking industry in Saudi Arabia, this study particularly recommends for the Islamic banks to redirect their short term and long-term marketing strategies and to focus on improving their management skills at the branch level.

Item Type: Article (Journal)
Additional Information: 1820/68382
Uncontrolled Keywords: Saudi banking industry, Efficiency measurement, Data envelopment analysis, Bank performance, Islamic finance
Subjects: H Social Sciences > HG Finance > HG3368 Islamic Banking and Finance
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button): Institute of Islamic Banking & Finance (IIiBF)
Depositing User: Prof. Dr. KHALIQ ISRAIL
Date Deposited: 18 Dec 2018 12:02
Last Modified: 09 Apr 2019 13:23
URI: http://irep.iium.edu.my/id/eprint/68382

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