Do Islamic and conventional banks have the same technology?

Abstract

Is there a technology gap between Islamic and conventional banks? Do Islamic and conventional banks have different cost efficiency levels? We show that conventional and Islamic banks have similar mean (aggregate) cost efficiency levels in the MENA area and there is no technology gap between the two types of banks. At the country level, Islamic banks are more cost efficient than conventional banks in Indonesia, Pakistan, Turkey and United Arab Emirates, and less efficient in Bangladesh, Kuwait, Malaysia and Tunisia. We analyse a very large sample of banks in twelve MENA and South East Asian countries between 2000 and 2006 and we use the meta-frontier approach to account for the sample heterogeneity