Investigating the Efficiency of Interest-Free Banking Operations in the Provinces of Iran from 2012 to 2020
Subject Areas : Economic
Ghasem Rezaei1
1
,
hamid asayesh
2
*
,
Reza Maaboudi
3
1 - PhD Student, Department of Economics, Islamic Azad University, Aligudarz Branch, Aligudarz, Iran
2 - Associate Professor, Department of Economics, Ayatollah Boroujerdi University, Boroujerd, Iran
3 - Faculty Member of the Department of Economics, Faculty of Humanities, Ayatollah Ozma Boroujerdi University, Boroujerd, Iran.
Keywords: Efficiency, random border analysis, interest-free banking ,
Abstract :
The objective of the present study is to examine the provincial efficiency trends of the interest-free banking system and analyze the factors influencing it. To evaluate the efficiency of banks and the banking system across provinces, two categories of variables were used: economic conditions and macroeconomic variables (provincial gross domestic product and provincial inflation rate) and bank performance variables (bank deposits, non-performing loans in the province, number of branches in the province, number of bank employees) at the provincial level across the country during the years 2012 to 2020. Additionally, stochastic frontier analysis and the Battese-Coelli model were employed to analyze the relationships between the variables. The findings revealed that the efficiency of banks gradually and slightly declined during the study period. Among the examined variables, economic growth had a positive effect on bank efficiency; thus, an increase in income in each province enhances the demand for loans and provides the necessary resources for deposits in banks. Moreover, an increase in non-performing loans reduces the efficiency of banks at the provincial level. Based on the study's results, the government can support banks through policy instruments such as tax exemptions, supporting industries, increasing per capita income, and consequently boosting bank resources while reducing non-performing loans.
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