Omani Islamic banks’ (including windows) total assets reached OMR6.4 billion (USD16.6 billion) in 2022. The financing growth of Islamic banks was 12.2%, exceeding conventional banks’ 3.4% growth. Islamic bank’s deposit growth of 10.9% also outpaced conventional banks’, which fell by 0.9%. The Islamic banking market share, based on both financing and deposits, crossed 18.5% in 2022.Islamic windows of conventional banks are significant growth drivers, with about 40% share of sector assets as of end-3Q22, while the balance is held by full-fledged Islamic banks. Islamic bank windows significantly benefit from their parent conventional bank in terms of use of their existing franchise and infrastructure, making them more cost-efficient. This study on the cost and profit efficiency of Islamic and conventional bank Islamic windows in Oman: A proposed framework . Moreover, we examine the bank-specific variables that may explain the sources of inefficiency. The empirical results indicate that banks in the Oman are relatively more efficient at generating profits than at controlling costs. We also find that in terms of both cost and profit efficiency levels, the conventional banks on average are more efficient than Islamic banks. Furthermore, we observe a positive correlation of cost and profit efficiency with bank capitalization and profitability, and a negative one with operation cost. Higher loan activity increases the profit efficiency of banks, but it has a negative impact on cost efficiency.
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