WHAT DETERMINES THE EFFICIENCY OF ISLAMIC BANKS? A FINANCIAL, SOCIAL, AND OVERALL PERSPECTIVE FROM MENA

This study examines the determinants of financial, social, and overall efficiency among Islamic banks in the MENA region and whether these determinants differ across efficiency dimensions. Efficiency scores are estimated using the Bounded Adjusted Measure (BAM) for 62 Islamic banks across 15 MENA countries over 2017–2024 and regressed on thirteen explanatory variables using fractional regression models. The findings show that financial and social efficiency respond to different drivers, supporting more targeted managerial and regulatory approaches. The study contributes to the literature by examining the determinants of financial, social, and overall efficiency within a single framework, addressing a literature that has largely focused on financial efficiency. The study is constrained by data availability, limited coverage of potential determinants, and the relative nature of BAM scores, which are benchmarked against the sampled banks.