Comparative analysis of technical efficiency of Islamic banks in selected low-income countries of Africa and Asia
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Date
2022
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Universiti Utara Malaysia
Abstract
Islamic banks in Africa and Asia have been characterised by some
technical inefficiencies. The sources (managerial issues or scale of
operation) of these inefficiencies still remain a problem of empirical
investigation since mixed reports have been given in that regard.
This study therefore investigated the sources of inefficiencies by
decomposing technical efficiencies of the banks and comparing the
components of Islamic banks in the low-income countries of Africa
and Asia. Data were collected from annual reports of the selected
banks and analysed using both descriptive and inferential statistical tools. Data Envelopment Analysis (DEA) was conducted to estimate
the pure technical and scale efficiencies of the banks. The study found
that the inefficiency attributable to all the selected banks were due
to pure technical efficiency (0.876), which was lower than the mean
value of scale efficiency (0.917). That is, the inefficiencies were caused
largely by managerial problems rather than operating scale. It was
also found that Islamic banks in Asia were more technically efficient
than those from Africa in terms of pure technical (0.920>0.827) and
scale efficiencies (0.934>0.902). The study concludes that managerial
issues such as insufficient competent staff, poor monitoring and so
on were the causes of low efficiency attributed to Islamic Banks in
Africa. It was thus recommended that Islamic banks in Africa should
employ staff members who are competent with requisite knowledge
of Islamic finance to improve the pure technical and overall efficiency
of the banks.
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Citation
Jimoh et al. (20220