Abstract

The main purpose of ihis study is to examine the (relative) efficiency of the full-fledged Islamic banks compared to standalone Islamic banking branches of Conventional Banks (CBs) operating in Pakistan over the period 2007-2012. The Data Envelopment Analysis (DEA) is employed under CRS and VRS approach, which allows for the decomposition of efficiency into technical, allocative and cost efficiency. The study also measures changes in productivity over the time as a result of technical progress by employing the Malmquist Total Factor Productivity Index. The results explain that the technical efficiency of standalone Islamic Banking Branches (IBBs) of the CBs is better than that of full-fledged Islamic banks, but allocative and cost efficiency of full-fledged Islamic banks are higher than that of IBBs of conventional banks.

Keywords

Standalone Islamic Banking Branches (IBBs); Data Envelopment Analysis (DEA); Technical Efficiency (TE); Allocative Efficiency (AE); Cost Efficiency (CE); Constant Return to Scale (CRS); Variable Return to Scale (VRS); Total Factor Productivity Index.