NON-PARAMETRIC APPROACH TO MODEL THE BRANCH-WISE EFFICIENCY OF ISLAMI BANK BANGLADESH LIMITED (IBBL): AN EMPIRICAL STUDY
AbstractThis study examines the branch-wise technical, pure technical, scale and allocative efficiencies of Islami Bank Bangladesh Limited (IBBL) using panel data for the year 2003 to2007. The technique of DataEnvelopment Analysis (DEA) has beenutilizedtocompute the efficiencies of branches. The average allocative efficiency is 61-76%, whereas the average technical efficiencyisabout51-65% during the studyperiod. Thismeans that the dominant source of inefficiency is duetoboth technical inefficiency and allocative inefficiency but technical inefficiency has gotmore contribution to inefficiency than allocative inefficiency. These results are consistentwith the fact that the Islamic banks do notoperateinan overallregulatory supportive environment.Theyare noteven technicallysound enough in their operations. Average scale efficiencyisabout 53%, and average pure technicalefficiencyisabout68%t,suggesting thatthe major source of the total technical inefficiency for IBBL branches are not pure technical inefficiency(inputrelated) butscale inefficiency(outputrelated). Study results indicate that there has been moderateincrease inproductivitygrowth over the years. Productivityincreases inIBBLbranches are mainly driven bytechnologicalchange (opening up and penetrating inother markets) not technical efficiency change(efforts of inefficient bankstocatchupwiththe efficient ones). The results show that larger branch size isassociated with higher efficiency. These resultsindirectlysupportthe economies of scale arguments in IBBL branches.
JEL Classification:D61, G21, Z12
Keywords:Bank Efficiency, Productivity, Islamic Banking, DEA Approach, Bangladesh
How to Cite
Rahman, M. M. (2013). NON-PARAMETRIC APPROACH TO MODEL THE BRANCH-WISE EFFICIENCY OF ISLAMI BANK BANGLADESH LIMITED (IBBL): AN EMPIRICAL STUDY. International Journal of Economics, Management and Accounting, 19(2). Retrieved from https://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/180