GRM 2010 GRM 2011

Abstract Details

 
AUTHOR NAME
 
Family Name:
Al MATRAFI
 
First Name:
MOHAMMAD
 
ABSTRACT OF PAPER
 
Title of Paper:
EFFICIENCY, PRODUCTIVITY AND COMPETITIVENESS: A COMPARATIVE ANALYSIS OF ISLAMIC AND CONVENTIONAL BANKS IN SAUDI AND UAE
 
Paper Proposal Text :
ABSTRACT


As an integral part of my PhD research, this paper is primarily concerned with a comparative analysis of the Islamic and conventional banks in Saudi Arabia and the UAE based on the estimation and evaluation of efficiency and productivity indices, using the data envelopment analysis (DEA). The choice of these two countries is based on the fact that these large economies together accommodate up to 60% of total banks in the GCC. Furthermore, the two countries tend to nurture a significantly larger number of Islamic banks in the region. In helping to arrive at a more consistent choice of variables, the research has used the RBV; under which a bank is assumed to maintain sustainable competitive advantage over its competitors, if and only if it maintains and enhances its quality-adjusted resources. This study considers a 16-year period of 1998-2013, which includes a series of banking reforms and a worldwide financial turmoil. In observing for any possible structural break, the study has divided the period into two sub-periods of 1998-2007 and 2008-13. Unlike other studies, this research, using RBV approach, has incorporated and quantified intangible variables into the process of selecting appropriate inputs and outputs. The preliminary estimated efficiency indices show that there have been large variations at the bank level in both countries. In particular, in both countries, the 2007-08 has seen a massive decline in almost all banks’ efficiency indices; with Emirati banks having been hit more severely. However, at the industry level, post-reform period has seen rather substantial improvement in efficiency gains for all banks in both countries. Nevertheless, the Saudi banks appear to have recovered better than their counterparts in UAE. The productivity growth estimates also show large variations at the bank level, but rather small changes at the overall sector level over the entire period. Furthermore, due to their more conservative approach to risk and capital, the research reports that the Islamic banks in both countries tend to have performed better during and immediately after the financial crisis compared to their counterparts in conventional banking sector. The research has identified several policy implications arising from the findings. One of the most important issues arising from the study relates to lack of competition in both countries banking sectors, but more severely in Saudi Arabia, which has been responsible for relatively low levels of efficiency and productivity gains over the period of the study. Finally, the Islamic banks have, on the whole, managed to grow faster and remain risk-averse hence being equipped with means of coping with adverse economic downturns.

Keywords: Efficiency, Productivity, RBV, DEA, Saudi Arabia, Banking Sector
 
 
 

WITH THE GENEROUS SUPPORT OF