Efficiency analysis of Islamic banks in Pakistan

This paper aims to empirically analyze the efficiency of full-fledged Islamic banks, Islamic branches of conventional banks and conventional banks in Pakistan.

The paper uses data envelopment analysis to measure and compare the efficiency of banks. Three measures of efficiencies such as total technical efficiency, pure technical efficiency and scale efficiency are computed to achieve the objective of the paper.

Overall, full-fledged Islamic banks are less efficient in terms of total technical efficiency and pure technical efficiency than conventional banks. However, Islamic branches of conventional banks are highly scale-efficient than their counterparts.

The findings need to be supported by considering production function and risk exposure factors.

This paper evaluates and compares the efficiency of Islamic and conventional banks by utilizing the largest available data set during 2007-2014.