Monzer Kahfhighest average profit in other banks, while holding depositors’ share
constant. We then repeat the same experiment, with fixed average profit and
compare the average of depositors’ profit share.
Despite the fact that any comparison of numbers between two banks
operating in different environments is not free of errors due to the existence
of many factors over which the bank management have no control, the
power of numbers cannot be overlooked. A numerical exercise to measure
efficiency in a community of the 7 Islamic banks will give us a useful insight
on their relative efficiency. This will be done once by fixing equity profit at
the level of the highest bank and rendering the remainder to depositors
(Table 21, column 2). We then repeat the exercise again by fixing
shareholders’ profit at the level of the lowest bank and rendering the
remainder to depositors (Table 21, column 3). We will again repeat the same
exercise but with fixing the highest and lowest values depositors shares and
rendering the differences to the shareholders (Table 21, columns 4 and 5).
Table 21 is given below in which the last two columns depict actual averages
of depositors’ share and shareholders’ profit.
Table 21: Efficiency in Islamic Banks 1998-2001
BANK APD* APD APS* APS APD/ Deposits Equities APS/
Shareholder’s
Profit fixed
at 22.82%Shareholder’s
Profit Fixed
at 3.81%Depositor’s
Share fixed
at 5.98%Depositor’s
Share fixed
at 2.79%
A 1.47 2.92 -36.50 5.43 2.79 5.43
B 0.56 4.09 -6.36 10.83 3.17 8.80
C 2.42 4.63 -7.81 19.64 4.19 7.64
D 2.52 5.55 1.10 21.12 5.00 7.28
E 3.36 5.18 -4.50 28.74 3.83 17.91
F 4.08 5.98 3.81 35.79 5.98 3.81
G 4.16 6.78 9.62 32.70 4.16 22.82
Average 2.65 5.02 -5.81 22.04 4.16 10.52Note: APD = Average Profit of Depositors
APS = Average Profit of Shareholders
Column 5 of Table 21 above indicates that if all the 7 Islamic banks were
to distribute to their depositors the same returns distributed by the lowest
bank, i.e. 2.79 per cent, the best of the banks in terms of managerial
efficiency, represented by the average profit realized would be bank F that