Efficiency comparison between conventional and Islamic microfinance: empirical evidence from Grameen Bank and akhuwat microfinance using data envelopment analysis

Andrif, Youssef and Ahjij, Abdelhafid and Patel, Ibadurrehman and Abdul, Majed and Redzuan, Nur Harena (2021) Efficiency comparison between conventional and Islamic microfinance: empirical evidence from Grameen Bank and akhuwat microfinance using data envelopment analysis. In: International Conference on Islamic Financial Literacy (ICiFIL 2021), 7-8 July 2021, Virtual. (Unpublished)

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Abstract

Efficiency in operations is one of the major contributing factors in ensuring the sustainability of a microfinance institution (MFI). This study attempts to compare the efficiency of a conventional MFI and that of an Islamic MFI to identify lessons to be learned from the best practices of the institutions. To achieve this objective, two MFIs are selected, namely Grameen Bank in Bangladesh – representing conventional MFI, and Akhuwat Microfinance in Pakistan – representing Islamic microfinance. The study uses the quantitative research approach by adopting the Data Envelopment Analysis (DEA) on data covering the period from 2013 to 2019. The DEA is the most commonly used non-parametric approach, being adopted in this study to investigate the efficiency of both MFIs. In the DEA technique, efficiency is measured by the use of the Malmquist index. The Malmquist efficiency measures are broken down into two components, namely efficiency change and technical change index. Efficiency change is further broken down into pure efficiency and scale efficiency. To measure their efficiencies, selected input-output data required for the assessment were extracted from annual reports published by both establishments. Through the comparative study. This study finds that during the years of study, Akhuwat MFI is inefficient, with the organization squandering 38 percent of its inputs, compared to only 3 percent for Grameen Bank with 2018 being the only year where Akhuwat was 100% efficient. This paper is limited in its scope to applying the Grameen Bank and Akhuwat Pakistan and the challenges they face in terms of operating effectively in a society that still lacks the necessary skills and training to adapt to this emerging MFI.

Item Type:	Conference or Workshop Item (Plenary Papers)
Uncontrolled Keywords:	Data envelopment analysis, Efficiency, microfinance institutions, Grameen Bank Bangladesh, Akhuwat Microfinance
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:	Nur Harena Redzuan
Date Deposited:	07 Jan 2022 15:18
Last Modified:	07 Jan 2022 15:18
URI:	http://irep.iium.edu.my/id/eprint/95172

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