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Technical Efficiency and Stability to Shocks: a Comparison Between Islamic Banks and Conventional Banks in MENA Region

Author

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  • Mohamed Chaffai

    (Faculté des Sciences Economiques et de Gestion de Sfax, Sfax University)

Abstract
The banking industry market is shared by conventional and Islamic Banks in MENA. These latter banks have been expanding during the last decade. In an intensely competitive environment, it is interesting to compare banking performance and resiliency by considering two competing bank groups: Islamic and commercial banks. Using parametric distance function models, hyperbolic and output distance functions, two efficiency measures related to profit and revenue are compared. Results find evidence of technical efficiency differences, some evidence with bank size but reject the common technology assumption. We evaluate the business risk of each bank group by considering the impact of a sharp abrupt deterioration in their activities. Results show that Islamic banks have the lowest resiliency to shocks when compared to the two other bank categories while a shock on non lending activities has a much more impact on Islamic business banks’ business risk.

Suggested Citation

  • Mohamed Chaffai, 2015. "Technical Efficiency and Stability to Shocks: a Comparison Between Islamic Banks and Conventional Banks in MENA Region," Working Papers 969, Economic Research Forum, revised Nov 2015.
    • Handle: RePEc:erg:wpaper:969
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    References listed on IDEAS

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    Cited by:

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    2. Zouheir Bouchaddakh & Mohamed Mekki Ben Jemaa, 2016. "Risk Sharing Vs Risk Bearing and Shifting: Evidence from Conventional and Islamic Banks of MENA Region Using Metafrontier Directional Distance Functions," Working Papers 1042, Economic Research Forum, revised 09 Jan 2016.

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