An Efficiency Analysis on Interest Free Banks: An International Comparison

Ali Coskun, Esra Balci


The purpose of this study is to analyze the comparative efficiency of interest free banks worldwide. This study also aims to investigate the reasons for inefficiency and provide suggestions for inefficient banks to improve their efficiency. The study measures and analyzes the overall technical efficiency (OTE), pure technical efficiency (PTE) and scales efficiency (SE) scores of 86 interest free banks from 24 different countries between 2010 and 2013. Data Envelopment Analysis (DEA), which is a non-parametric method, has been used in this paper. The results indicate that average of four years of overall technical efficiency (OTE) in selected interest free banks is about 45.8%. Their pure technical (PTE) and scales efficiencies (SE) are higher than OTE and have respectively 64.4% and 71.1%. The results of the analysis also indicate the potential improvements in inputs and outputs of the banks. This paper shows that the most and least efficient banks and compares efficiency of sample interest free banks in 24 countries in very recent years. It also includes benchmarks for the interest free banks and provides suggestions for improvements.

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This work is licensed under a Creative Commons Attribution 4.0 International License.