Research Paper on Islamic Bank(Meezan Bank)

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Science Series Data Report

Vol. 4, No. 1; Jan 2012

AN EMPIRICAL STUDY OF RELATIVE EFFICIENCY USING
FRONTIER ANALYSIS APPROACH – A CASE OF ISLAMIC
BANKS

Khizer Ali (Corresponding author)
Hailey College of Commerce, University of the Punjab, Lahore, Pakistan
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Muhammad Farhan Akhtar
Hailey College of Commerce, University of the Punjab, Lahore, Pakistan
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Shama Sadaqat
Hailey College of Commerce, University of the Punjab, Lahore, Pakistan
Email: [e-mail]

Abstract
The study aims to investigate the relative efficiency of Islamic banks of Pakistan for the period 20072010. Data envelopment analysis is used with an input minimization approach to measure the efficiency of
Islamic banks. The results reported that for the period under study, only one Islamic bank shows the consistency in its performance level with efficiency score 1, i.e. Meezan Bank Limited the oldest Islamic bank in Pakistan.
Although Islamic banking in Pakistan is still in its initial stages, which can be observed from the continuous losses from preceding years, Islamic banks are found to be relatively efficient with the passage of time. So far as total assets are concerned, the regression results reports insignificant relation with technical efficiency. It means that the technical efficiency does not depend exclusively upon total assets of the banks.
Keywords: Islamic banks; Efficiency;Data Envelopment Analysis; Pakistan
1.0 INTRODUCTION
Islamic banking represents a radical departure from conventional banking, and from the viewpoint of corporate governance; it embodies a number of interesting features since equity participation, risk and profit-and-loss sharing arrangements form the basis of Islamic financing. Using econometric techniques, this paper provides valuable insights as to the stability of Islamic banks and the factors responsible for the

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