Islamic banks in Malaysia falling short on efficiency, impacting profitability.
The study looked at how well Islamic banks in Malaysia are performing in terms of cost and profit efficiency. They used a method called Data Envelopment Analysis to measure efficiency levels and identify factors affecting productivity. The findings show that banks are better at controlling costs than maximizing profits. Improved resource management practices and economies of scale play a big role in efficiency. Technological advancements and technical efficiency also contribute to productivity growth. Overall, Islamic banks in Malaysia are not operating at full efficiency levels. Size of operation, market power, profitability, and capitalization are key characteristics of efficient banks.