Islamic Banks Efficiency in Western Conventional Economies

The main aim of this research is to investigate how efficient is the only existing Islamic bank in Bosnia and Herzegovina (B-H) related to average efficiency of other banks from our sample. The analysis has been conducted on the sample of 18 conventional and one Islamic bank from data published by Banking Agency of Federation of B-H for 2009. The banking and economic environment of B-H as European, post-communist and transition country is of conventional type, and it has not been analyzed in this sense ever before. B-H has not made any regulatory or economic adoption in banking sector for developing of Islamic banking, so Islamic bank is treated as a conventional one. This research is conducted by using of nonparametric technique DEA (Data Envelopment Analysis) as a mostly used tool for analysis of efficiency in banking. We have used two output and three input analysis according to input oriented approach. According to majority of indicators, Islamic bank has lower efficiency comparing