Document Type : Research Paper
Department of Mathematics, Tikrit University, College of Education for Pure Science, Iraq.
Tikrit University, Iraq.
Ministry in Education, Salah Al-deen’s Eduction, Tikrit, Iraq.
This research uses a statistical method to assess the efficiency and performance of Islamic and conventional banks. The Iraqi banks have been chosen as a case study in the period from 2006 to 2011. The data collected from, banks' financial reports, IMF database, the cost function and Seemingly Unrelated Regression were used to analyse the Iraqi bank's elasticity of substitution between inputs. It has been shown that the conventional banks in Iraq have better substitution than Islamic banks. In conclusion, the Islamic and conventional banks are exposed to a similar degree of risks, but different in nature; and the Islamic banks have less security than conventional banks to financial shocks. Since the Islamic banks cannot charge a fixed, predetermined return, and can't borrow from the financial market, so the Islamic banks could face more risk and volatile returns on their assets. The implication of that an excessive management modernization of Islamic banks is necessary to achieve a higher level of efficiency. This will give privilege for Islamic banks over the conventional bank. For conventional banks, they have to invent similar techniques to reduce cost and keep their position in the market.