Efficiency of Qatari banking industry: an empirical investigation

Abdul-Hamid Abdul-Wahab · Razali Haron

34 citations0/0 files storedInternational Journal of Bank Marketing

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Efficiency Analysis Using DEA Banking stability, regulation, efficiency Islamic Finance and Banking Studies

Abstract

Purpose The purpose of this paper is to examine the efficiency of the banking sector in Qatar. The paper utilizes 15 banks comprising Islamic, conventional and foreign banks for the duration of 2007 to 2011. Design/methodology/approach Data envelopment analysis (DEA) technique is applied to compute technical efficiency, pure technical efficiency and scale efficiency. Also, Malmquist productivity index (MPI) is used to identify the sources of productive efficiencies of the banks. Findings The results suggest that Qatari banks are operating below optimum performance and thus there is still room for improvement. While conventional banks are the most efficient in Qatar in terms of technical and pure technical efficiencies, Islamic banks are most efficient in terms of scale efficiency. Besides, pure technical inefficiency dominated scale inefficiency in the Qatari banking sector. Moreover, as compared to the Islamic banks, conventional and foreign banks recorded a reduction in average technical efficiency during the duration of the 2008/2009 global financial crisis. In terms of productivity progress, all the Qatari banks were experiencing a decline in productivity mainly attributed to less technological innovation in the banking sector of Qatar. Research limitations/implications Most of the banks in Qatar do not have published data before 2007 and after 2011. Practical implications There is less technological innovation in the banking sector of Qatar. Hence, bank managers in Qatar should focus on educating customers about modern banking technologies and other innovative banking services in Qatar. Originality/value This study is a pioneering effort in the application of DEA and MPI to study about the banking sector in Qatar.

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References

1978Measuring the efficiency of decision making units 1984Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis 2016Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries 1999Data Envelopment Analysis: A Comprehensive Text with Models, Applications, References and DEA-Solver Software 1982The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity 1997Efficiency of financial institutions: International survey and directions for future research 1953Index numbers and indifference surfaces 1977INPUTS, OUTPUTS, AND A THEORY OF PRODUCTION AND COST AT DEPOSITORY FINANCIAL INSTITUTIONS

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