Open AccessThe Input Requirements of Conventional and Shariahcompliant Banking
Author(s) -
Mariani Abdul-Majid
Publication year - 2010
Publication title -
s and p : sound and pictures
Language(s) - English
Resource type - Journals
ISSN - 1675-722X
DOI - 10.32890/ijbf2010.7.1.8399
Subject(s) - scope (computer science) , business , scale (ratio) , islamic banking , sample (material) , economies of scope , banking industry , economies of scale , monetary economics , economics , financial system , accounting , islam , computer science , marketing , philosophy , chemistry , physics , theology , chromatography , quantum mechanics , programming language
Islamic banking activities are limited within the scope of shari’ah which is within the scope of socially responsible and ethical banking activities, different from that based on interest-based banking. This paper attempts to measure the input data required by shari’ah-compliant banking in comparison with conventional banking to estimate their relative efficiencies and economies of and returns to scale. Cost and output distance functions were estimated for a sample of banks in 10 countries which operate both types of banking. The results showed that shari’ah-compliant banking has higher input requirements relative to interest based banking, but exhibit superior average efficiency only in Malaysia but inferior average efficiency in cross-country analysis. There is little evidence of differences in economies/returns to scale between shari’ah and conventional banks.