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Technical and scale efficiency of Islamic banking operations in Malaysia: an empirical investigation with a longitudinal perspective

Batchelor, Valli and Wadud, I.K.M. Mokhtarul 2004, Technical and scale efficiency of Islamic banking operations in Malaysia: an empirical investigation with a longitudinal perspective, Labuan bulletin of international business & finance, vol. 2, no. 1, pp. 51-69.

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Title Technical and scale efficiency of Islamic banking operations in Malaysia: an empirical investigation with a longitudinal perspective
Author(s) Batchelor, Valli
Wadud, I.K.M. Mokhtarul
Journal name Labuan bulletin of international business & finance
Volume number 2
Issue number 1
Start page 51
End page 69
Publisher Universiti Malaysia Sabah
Place of publication Labuan, Malaysia
Publication date 2004
ISSN 1675-7262
Keyword(s) Efficiency
Data envelopment analysis
Islamic banking
Malaysia
Summary Against the background of increasing competition from globalization and the trend towards consolidation, diversification and rationalization, the study of efficiency is most relevant in the Malaysian Islamic banking context, where all domestic commercial banks operate Islamic banking schemes. Using the non-parametric method of Data Envelopment Analysis (DEA), this study investigates the recent efficiency of the Malaysian Islamic Banking system. The attributions of technical efficiency (utilization of capacity) and scale efficiency (optimality of scale achieved) are identified. Further, Islamic Banking Schemes operating under the dual banking system of foreign and domestic commercial banks were benchmarked to the country's two full-fledged Islamic banks to provide insight of the relative efficiencies. Amidst an overall improvement in TE and SE, it was noted that foreign banks (FB) increased efficiency levels to achieve full efficiency over the six-year period, and domestic banks (DB) followed by smaller improvement while the fully-fledged Islamic banks (FFIE) experienced a general decline in efficiency which was solely attributed to scale inefficiency. The findings provide useful guidelines for policy implications and may also assist banks concerned with their strategic planning with regard to the future of Islamic banking.
Language eng
Field of Research 140209 Industry Economics and Industrial Organisation
HERDC Research category C1 Refereed article in a scholarly journal
HERDC collection year 2005
Copyright notice ©2004, Universiti Malaysia Sabah
Persistent URL http://hdl.handle.net/10536/DRO/DU:30008916

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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