The Battle of Islamic and Commercial Banks

This book compares the efficiencies of commercial and Islamic banks in nine Arab countries in the Middle East. We find that Islamic banks are more efficient in terms of cost, revenue and profit than commercial Banks. This result is thoroughly depicted in small Islamic banks when compared to small commercial banks but does not hold when we compare big Islamic to big commercial banks. In Bahrain, Jordan, UAE, and Yemen commercial banks are more efficient than Islamic banks, but the results of Qatar are similar to those of the cross sectional data. We also find that after controlling for size, the data indicate that big banks are more cost and profit efficient than small banks, which is typically the case of commercial banks but not of Islamic banks. A semi-log regression was used in the analysis.