Modeling banking efficiency in the MENA region between 2017 and 2021: Data Envelopment Analysis approach

Abstract

In this paper, we applied the Data Envelopment Analysis model under the assumption of variable returns to scale and output orientation to measure the efficiency of banks belonging to 12 MENA countries during the period 2017-2021. We divided the banks into two classes, conventional banks comprising 59 banks belonging to 11 countries and Islamic banks comprising 22 banks belonging to 7 countries. Concerning the 59 conventional banks, the results showed that the percentage of CCR-efficient conventional banks is low and does not exceed 16% and the average CCR-efficiency score reached 90% during the study period. We also found that Qatar is the only country whose conventional banks are BCC-efficient for all 5 years in a row, and that their CCR-efficiency scores are the highest, whereas conventional banks in Morocco and Jordan have the lowest average CCR-efficiency scores. For the 22 Islamic banks, the results showed that the percentage of CCR-efficient Islamic banks was low, at just 14%, and that their average CCR-efficiency score was 64%. We also found that Qatar is the only country whose Islamic banks are on average CCR-efficient over the 5 years, and that Moroccan Islamic banks have the lowest average CCR-efficiency score, reaching 36%.