Abstract

This study investigated the scale efficiency scores of Islamic banks of Pakistan for the period 2006 - 2009. Non-parametric technique Data Envelopment Analysis (DEA) was applied on the data collected from the annual reports of banks. Both CRS and VRS specification were applied to calculate scale efficiency under input-orientation. The results suggest the Dawood Islamic bank was the most scale efficient Islamic bank. Also the findings suggest that the Islamic banks had the highest mean scale efficiency scores in 2007. This work is the very first effort to compute the scale efficiency of Pakistani Islamic banking sector.

Key words: Scale efficiency, data envelopment analysis, Islamic banks.