Evaluation of Changes of Total Factor Productivity and Its Components of Islamic Banks in Bangladesh: An Application of Malmquist Index

Md. Abu Sina, Md. Abdus Sabur, Md. Ferdausur Rahman

Abstract


Bangladesh is a Muslim country covering more than 80% Muslim citizens. They wish to lead their lives as per Islamic Sharia’h. Islamic banks in Bangladesh operate their activities in accordance with the rules and regulations of Islamic Sharia’h. This paper is an attempt to measure the changes of total factor productivity (TFP) and its components of Islamic banks in Bangladesh using Malmquist index. Seven Islamic banks of Bangladesh are selected as sample purposively. Mainly secondary data ranging 2009-2013 have been used in this study. TFP growth measurement is not only very important but also crucial for the better management of a bank because economic growth cannot be sustained without improving TFP. The paper reveals that there is no remarkable change in the mean TFP changes of the selected banks. It is found that the mean TFP change of Al-Arafah Islami Bank Limited is the best among the selected banks under study. On an average, approximately 4.3% of this change is found in the overall selected Islamic banks. To improve the mean total productivity change, there is an immense need to enhance technical knowledge, increase managerial skills, introduce more technological supports, and increase the scale efficiency.

Aus. J. Isla. Finan. & Busi. Vol 3(2), October 2017, P 81-90

Keywords


Change, Total Factor Productivity, Technical Efficiency and Malmquist Index

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