An Empirical Analysis of Cost Efficiency in GCC Banking Sector: A Comparative Study between Islamic & Conventional Banks
Keywords
cost efficiency, technical efficiency, allocative efficiency, banking sector, DEA, GCC areaAbstract
This study seeks to evaluate and contrast the efficiency of Islamic and conventional banks across multiple dimensions, including technical efficiency, resource allocation, and cost efficiency in the banking sector of GCC countries. To do that, we use non-parametric techniques “DEA” on 48 banks across 6 countries (2010-2024). we found that Islamic banks exhibit varying levels of technical efficiency across different countries. In some cases, they demonstrate high technical efficiency, particularly in Oman and the UAE. Conventional banks also vary in technical efficiency. Bahraini Conventional banks are considered the most technically efficient, while Omani Conventional banks face significant inefficiencies. Conventional banks, particularly in Saudi Arabia and the UAE, demonstrate higher efficiency in resource allocation and cost control compared to Islamic banks. However, there are variations among conventional banks, with Bahraini banks exhibiting the highest efficiency in resource allocation.
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