Assessing Relative Efficiency of Islamic Banks in Bahrain: An Application of Data Envelopment Analysis

The purpose of this paper is to measure the comparative operating efficiency of retail Islamic banks operating in the Kingdom of Bahrain over the sample period 2010-2013. The study employed Data Envelopment Analysis (DEA) model as a non-parametric multi-criteria methodology for assessing relative efficiency of Decision-Making Units (DMUs). The variables considered are the financial information gathered from the financial statements issued by the investigated banks. The paper computes banks technical, pure technical, and scale efficiency scores, areas of efficiency improvements, and composite reference sets of the relatively inefficient banks