Technology Gap and Managerial Efficiency: A Comparison between Islamic and Conventional Banks in MENA

  • Mohamed Chaffai
  • M. Kabir HassanEmail author


In this paper, we compare the technology gap and managerial efficiency between Islamic banks and conventional banks in 15 MENA countries. Using unbalanced panel data that covers the period 2002–2014, we estimate a stochastic meta cost frontier and find evidence of important technology heterogeneity in the region’s banking systems. It appears that the inefficiency caused by non-optimal use of the most advanced banking technology is much more important than managerial inefficiency. The technology gap is higher in Islamic banks and foreign banks than conventional domestic banks. We also investigate the determinants of these cost inefficiencies. Our results show that online banking is an important driver that can reduce the technology gap across banks and improve managerial efficiency, while size proves to have a negative impact on technology gap. Bank concentration has a positive impact on managerial efficiency restricted to Islamic banks.


Banking efficiency Meta frontier Cost function Technology gap 

JEL Classifications

G21 D22 D24 P52 


Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.


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Authors and Affiliations

  1. 1.Economics, Research Unit on Production EconometricsSfax UniversitySfaxTunisia
  2. 2.Finance and Hibernia Professor of Economics and Finance and Bank One Professor in Business, Department of Economics and FinanceUniversity of New OrleansNew OrleansUSA

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