Efficiency and performance of Islamic banks amid COVID-19

Abstract

Purpose This paper aims to investigate the efficiency and performance of the Islamic banking industry amid the COVID-19 pandemic. Design/methodology/approach The authors used a two-stage data envelopment analysis to first estimate the efficiency of 78 Islamic banks (IBs) across 15 countries for the 2005–2020 period (a total of 782 bank-year observations) and then to examine their determinants, including the COVID-19 pandemic. Findings The authors found that the Islamic banking industry performed at a moderate level during the 2005–2020 period, providing evidence that IBs are resilient to the financial shocks created by COVID-19. The authors also found that bank-level characteristics (such as bank size) and country-level characteristics (such as inflation) can contribute to the bank’s operational efficiency. Research limitations/implications The results of this study suggested that banking management and government macroeconomic policy, especially in terms of precautions and continuous support, are important for IBs to improve their performance. Originality/value To the best of the authors’ knowledge, this is the first study to examine the efficiency and performance of IBs amid COVID-19.