THE X-EFFICIENCY OF THE SUDANESE ISLAMIC BANKS

  • Abd elrhman Elzahi Saaid Department of Banking and Export, College of Business Studies, Sudan University of Science and Technology, P. O. Box 407, Khartoum, Sudan. (e-mail: elzahi@yahoo.com)
  • Saiful Azhar Rosly, Mansor H. Ibrahim Professors, Department of Economics, Kulliyyah of Economics & Management Sciences, International Islamic University Malaysia, Jalan Gombak 53100 Kuala Lumpur.
  • Naziruddin Abdullah Associate Professor, Department of Economics, Kulliyyah of Economics & Management Sciences, International Islamic University Malaysia, Jalan Gombak 53100 Kuala Lumpur.

Abstract

Important changes have taken place in the Sudanese banking industry since 1989. The transformation of the banking industry to conform to the Islamic principles has put the spotlight on the performance of the Islamic banks in Sudan. This study investigates the X-efficiency (technical and allocative) of these banks. The study used the basic Stochastic Frontier Approach (SFA). This is accomplished by decomposing the error term into two components, namely random noise (vi) and possible inefficiency (ui). The empirical results tend to suggest that banks in the sample had low levels of X-efficiency. This implied that the Sudanese Islamic banks were not optimizing their inputs usage. However, the results also showed that the inefficiency in the Sudanese Islamic banks could be more associated with inputs wasting (technical inefficiency) rather than choosing the incorrect input combinations (allocative inefficiency). The study has several important policy implications to offer, one of which is that it could be taken as a guideline for the Sudanese government to chart a policy on banking deregulation and mergers. Moreover, the study provides some information and identifies the source of X-inefficiency, which could, in turn, be used to assist banks’ managements to overcome the problems of inefficiency.JEL classification: G21Key words: X-inefficiency, Islamic banks, Stochastic Frontier Approach
How to Cite
SAAID, Abd elrhman Elzahi; ROSLY, MANSOR H. IBRAHIM, Saiful Azhar; ABDULLAH, Naziruddin. THE X-EFFICIENCY OF THE SUDANESE ISLAMIC BANKS. International Journal of Economics, Management and Accounting, [S.l.], v. 11, n. 2, feb. 2013. ISSN 2462-1420. Available at: <http://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/90>. Date accessed: 21 nov. 2017.
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