The Relationship between Asset Size and Performance in Islamic Banks: An Application with SWARA-AHP-COPRAS Methods in the Covid-19 Era

Abstract This study aims to examine the Islamic banking performances of the 10 countries with the highest Islamic bank assets between 2018-2022 (including the period of Covid-19 pandemic), to observe whether different criteria weighting methods yield different results and whether there is a relationship between bank asset size and performance ranking. Since one of these countries (Iran) has missing data, the analysis include 9 countries with the highest Islamic bank assets. For this purpose, multi-criteria decision making (MCDM) methods (SWARA, AHP, and COPRAS) were used to measure the Islamic banking performance of 9 countries for which the necessary data were available between 2018 and 2022. The countries included in the study were determined as Saudi Arabia, Malaysia, United Arab Emirates (UAE), Qatar, Kuwait, Indonesia, Bahrain, Turkey, and Bangladesh, respectively, according to their Islamic financial asset size, and the performance of these 9 alternatives was examined within the framework of the determined criteria. In the model, 9 criteria (return on equity, return on assets, gross income, operating expenses, problematic loans, personnel expenses, leverage, liquidity and open foreign exchange position ratios) were determined by considering the relevant literature. First of all, the weights of the determined criteria were calculated with SWARA and AHP methods, and these weights were used in the COPRAS method to rank the Islamic banking performances of the countries. According to the findings, return on equity emerged as the most important criteria, followed by return on assets, operating expenses, liquidity, and leverage, respectively. By using the criteria weights in the COPRAS method, the performance ranking was obtained, and the country with the highest performance in all years was determined as Qatar, while the country with the worst performance was determined as Saudi Arabia. When Turkey’s performance ranking among 9 countries was examined by years; it was concluded that it ranked 3rd in 2018 and 2019, 7th in 2020, 1st in 2021, and 3rd in 2022. Different criteria weighting methods did not change the performance ranking of the countries, and when the performance ranking is compared with the asset size ranking of the countries, a negative relationship was determined between them.