Efficiency in Arab Banking

Abstract

This chapter investigates the efficiency features of a variety of Arab banking systems. In particular we report recent evidence on banking sector efficiency in Egypt, Jordan, the Gulf and various Maghreb countries. The empirical evidence on bank efficiency in these countries can be used to provide insights into the impact of economic and financial reforms. The first part of the chapter examines in detail the recent study by Al-Jarrah (2002) and Al-Jarrah and Molyneux (2003) who examine the cost and profit performance of a sample of banks operating in Jordan, Egypt, Saudi Arabia and Bahrain between 1992 and 2002. The second part of the chapter examines the efficiency of Gulf banks, summarizing the results from Al-Shammari (2003) and Mohamed (2003). The final part of the chapter discusses recent evidence from Bakhouche (2004) who analyzes the cost and profit efficiency of Algerian, Moroccan and Tunisian banks up to 2002. Despite the extensive literature that has examined productive efficiency, especially in the US banking system and other European markets, empirical research on financial sectors in developing countries, including Arabian countries, is limited. The chapter therefore aims to bring together studies on Arab banking systems in order to examine the impact of economic and financial reforms which have taken place in these countries over the past two decades. Why