Efficiency in Islamic Banking During a Financial Crisis-An Empirical Analysis of Forty-Seven Banks

Abstract

The present paper measured the efficiency of Islamic banks during economic troubles of 2006-2009 to address the question if Islamic banks were efficient and stable. This paper addresses this question by measuring efficiency through employing the on-parametric technique, Data Envelopment Analysis (DEA) and t test was used to test the hypotheses. This study extends research, which suggests that large Islamic banks showed an increase in efficiency during 2006 to 2008 and decline during 2009. However, small to medium Islamic bank sample started at a lower level of efficiency. In addition, the results showed that the efficiency of Islamic banks operates in Middle Eastern and non-Middle Eastern Counties have increased during an economic crisis.

Keywords: Islamic Banks, Data Envelopment Analysis, Financial Crisis, Middle

JEL Classification: G01, G21, G24, G29