التكامل الاقتصادي
Volume 13, Numéro 3, Pages 83-98
2025-09-30

Technical Efficiency And Benchmarking Analysis Of Saudi Islamic Banks (2020–2024)



Authors : Mouna Younes .

Abstract

This study uses Data Envelopment Analysis (DEA) under both Constant Returns to Scale (CRS) and Variable Returns to Scale (VRS) input-oriented models to assess the technical efficiency, benchmarking dynamics, and efficiency trends of fully Islamic banks listed on the Saudi Stock Exchange over the 2020–2024 period. Annual financial data was used to examine three primary outputs (total financing, net income, and operational income) and four significant inputs (customer deposits, total assets, personnel costs, and fixed assets). The findings show that all banks consistently demonstrated strong management and operational performance, achieving full pure technical efficiency (1.000) under the VRS model. However, the CRS model revealed minor inefficiencies in certain banks and years, which were mostly caused by scale inefficiencies rather than managerial shortcomings. According to benchmarking studies, Al Rajhi Bank and Alinma Bank consistently lead in efficiency and serve as models for peers who occasionally experience scale inefficiencies. Additionally, trend research shows how resilient the industry is, as evidenced by its quick recovery from shocks like the COVID-19 pandemic. These results demonstrate that scale optimisation, not operational enhancements, will be the primary source of future efficiency gains. This has strategic ramifications for bank management, regulators, and legislators in line with the goals of Saudi Vision 2030. Reliance on financial data is one of its limitations; to capture dynamic efficiency patterns, future research could incorporate non-financial parameters and use productivity change methodologies

Keywords

Islamic banking; Technical efficiency; Data Envelopment Analysis; Benchmarking; Scale efficiency.

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