On the relative efficiency of conventional and Islamic banks: a DEA-window approach

Abstract

This paper explores the relative efficiency of 65 conventional and Islamic banks in the Gulf Cooperation Council (GCC) region using the Data Envelopment Analysis (DEA) over the period from 2002 to 2010. The empirical results suggest that the proposed input variables are significantly related to the output variables and that the input and output combinations impact the efficiency scores of both Islamic and conventional banks. The results from the Constant Return to Scale (CRS) and Variable Return to Scale (VRS) procedures in three out of five DEA models suggest that Islamic banks are significantly less efficient than conventional banks. Results from the remaining two DEA indicate no significant differences in the efficiency status of these banks.