Evaluation of Comparative Efficiency of Islamic Banking in Iran and other Islamic Countries Using Data Envelopment Analysis (DEA)

The study investigates the comparative efficiency of Iranian Islamic banks and other Islamic Banks in world over a period of 2008-2011, by utilizing non-parametric technique of Data Envelopment Analysis. There are 18 Iranian Islamic banks (Private, Privatized and Public) and 18 Islamic banks over the world. Based on two different assumptions of variable returns to scale and constant returns to scale, the Islamic Banks are ranked according to their efficiency in order to analyze the factors affecting the level of efficiency of these banks. On the basis of the finding of the research, strategies to enhance the efficiency of the Iranian Islamic Banks have been proposed. Results indicate that Iranian banks in both constant returns to scale and variable returns to scale are more efficient in comparison with their counterparts abroad. If the Iranian banks decide to enhance their performance, it is essential for them to reduce their fixed assets and the costs of their human resource, as well as strengthening legal supervision.