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Item Capital adequacy, risk absorption, and operational efficiency of Islamic in sub-Saharan Africa(University of Turin, 2026) Njogo, Michael Njoroge.; Korir, Fiona Jepkosgei.; Dallu,Abdallah Mambo.Abstract This study examines how capital adequacy shapes the operational efficiency of Islamic banks in Sub-Saharan Africa (SSA), with particular emphasis on its role as an internal risk-absorption mechanism rather than a purely prudential stability buffer. Despite its central role in Islamic banking regulation, the efficiency implications of capital adequacy, particularly in developing and institutionally constrained Islamic finance markets, remain largely unexplored. Based on a balanced panel of fully-fledged Islamic banks in SSA from2010to 2024, the paper employs a two-step empirical approach. Bias-corrected operational efficiency scores are estimated in the first stage using the Simar–Wilson two-stage Data Envelopment Analysis (DEA) framework. In the second stage, we explore the non-linear effects of capital adequacy on efficiency using panel regression techniques, controlling for bank-specific and institutional factors. To address endogeneity, persistence, and reverse causality, a dynamic panel model is estimated using System GMM as a robustness check. The findings indicate non-linear relationship between capital adequacy and operational efficiency. Moderate capital buffers are associated with improved efficiency through higher loss absorption capacity and stabilisation of operating costs, while excessive capitalisation is accompanied by scale inefficiencies and less effective intermediation. These results indicate that Islamic banking exhibits an efficiency trade-off in capital adequacy, as prudential strength beyond an optimal level may limit productivity in resource allocation. The study makes an important contribution to Islamic banking literature by reframing capital adequacy as a channel of structural efficiency and by providing rare dynamic evidence from SSA. This raises policy implications and suggests the need for commensurate capital calibration that balances prudential resilience against operational efficiency for emerging Sharīʿah-compliant banking systems.Item Scale efficiency and technical efficiency in Islamic banks: Evidence from Sub-Saharan Africa(SSBFNET, 2026) Njogo, Michael Njoroge.; Korir, Fiona Jepkosgei.; Dallu,Abdallah Mambo.Abstract This study investigates whether inefficiencies in Islamic banking in Sub-Saharan Africa (SSA) are primarily driven by managerial limitations or by suboptimal scale of operations. While existing studies largely report aggregate efficiency scores, limited attention has been given to decomposing efficiency into its underlying components in emerging Islamic banking systems, particularly within the SSA context. The study employs a balanced panel of 35 fully fledged Islamic banks operating in SSA over the period 2010–2024. Operational efficiency is estimated using a bias-corrected Data Envelopment Analysis (DEA) model under an input-oriented Variable Returns to Scale (VRS) framework. To enhance statistical reliability, the Simar–Wilson bootstrap procedure with 2,000 replications is applied. Efficiency scores are decomposed into pure technical efficiency and scale efficiency to distinguish between managerial inefficiencies and structural scale constraints. The results indicate that overall efficiency levels remain low, with inefficiencies largely driven by scale factors rather than managerial performance. A significant proportion of banks operate under increasing returns to scale, suggesting suboptimal size linked to structural constraints such as limited market depth, fragmented regulatory environments, and underdeveloped financial infrastructure. Although pure technical efficiency shows moderate improvement over time, managerial gains are insufficient to offset these systemic limitations. The findings highlight the need for regulatory harmonization, market integration, and strategic expansion or consolidation to enable Islamic banks to achieve optimal scale and improve operational efficiency in SSA. This study provides one of the first comprehensive efficiency decomposition analyses of Islamic banks in SSA using bias-corrected DEA, offering new insights into the relative importance of structural versus managerial sources of inefficiency in emerging financial systems.