Comparing the Efficiency of Transactional Agreements and Cooperative Agreements in Free of Interest Banking System Using Data Enveloping Analysis Approach (Case Study: Mellat Bank Branches in Kermanshah Province)

Authors

1 Associate Professor of Razi University

2 Assistant Professor of Razi University

3 M. A. in Economics, Razi University

Abstract

Bank's resources are allocated according to different Islamic agreements in free of interest
banking system. Estimating of the efficiency of this Islamic agreements in free of interest
banking system can be used in policy making for banking sector. Therefore study of different
Islamic agreements efficiency in free of interest banking system through modern scientific
approaches is of outmost importance. Then in the pesent study the efficiency of transactional
agreements and cooperative agreements are compared utilizing the DEA approach. In this
direction, by using DEAP 2 software and processed data related to five variables as input and
three variables as output, the level of efficiency in transactional agreements and cooperative
agreements has been estimated. The data related to 52 branches of Mellat bank in Kermanshah
province as case study were used for estimation. The finding of this research states that in the
case of estimating of transactional facilities efficiency, 40 percent of branches stay on the
efficiency border and in the case of estimation of cooperative facilities efficiency, 35 percent of
branches stay on the efficiency border so they are efficient. Moreover, estimated model shows
that under the condition of variable return to scale, the average technical efficiency for
transactional facilities in branches is equal to 0.85, and for cooperative facilities in branches is
equal to 0.74. So, the efficiency of transactional facilities is more than the efficiency of
cooperative facilities. Also the results indicate economies of scale because most of the branches
own increasing return to scale for both transactional facilities and cooperative facilities.

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