Efficiency Measurement of Conventional and Islamic Banks in Bangladesh: A Case Study by Using Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) Approaches

In light of the recent drop in their profitability this study looked into whether conventional and mixed banks in Bangladesh were more efficient than Islamic banks. For the years between 2014 and 2020, we examined 300 firm-year observations from 40 private banks, and researcher discovered strong proof that conventional and mixed banks are more efficient than Islamic banks. With the help of Data Envelopment Analysis and Stochastic Frontier Analysis, author calculated operational efficiency. Additional research revealed that Islamic banks' inferior efficiency was caused by their non investment revenue. The most recent years in our sample frame showed a considerable decline in Islamic banks' efficiency compared to the early times during that window. These results enabled us to provide an explanation for the recent drop in the relative profitability of Islamic banks. In order for Islamic banks to be competitive in Bangladesh's rapidly expanding banking market, researcher advises management to provide their assortment of non-investment goods and services more consideration.