Malaysia and the Turkish Islamic banking efficiency and performance analysis

The recent financial crises have strongly pointed the importance and strength of Islamic finance, especially Islamic banking system to the economic and financial World. This strength of the system persuades academic researchers and financial professionals to focus on the efficiency and performance of the Islamic banking system. For that reason, the main objective of the research is to analyze the performance and efficiency of islamic banks in Turkey compared to Malaysia. For this purpose, this study selects three banks from Turkey and seven banks from Malaysia. To obtain vibrant findings, it uses two frequently used analysis techniques in literature—first, ratio analysis in order to ascertain profitability, liquidity, and risk and solvency, on the other hand, Data Envelopment Analysis (DEA) for calculating efficiency scores considering two Input and output-oriented models (CCR and BCC). After applying both techniques, the results show that though Turkish islamic banks' efficiency score higher, liquidity as well as risk and solvency are not as higher as it should be. However, its profitability is much higher compared to Malaysian islamic banks.