Islamic banking and finance is considered a novel way of conducting financial matters for growth and social inclusion. It has expanded in an unprecendented manner since its initial appearance in the mid-1970s. Since then, Islamic banking has earned recognition worldwide which has paved the way for a rapid growth in the Islamic banking services industry. With this background, this study focuses on the potential for Islamic banking in Libya. Since the 1970s the Libyan banking sector has witnessed remarkable changes especially after the state introduced the nationalisation programmes and socialist system. Under public ownership, the banking industry, however, has underperformed due to various problems such as the high level of non-performing loans. Therefore, the state has recently initiated a reform and deregulation policy to enhance the performance of the sector. This study aims to analyse the developments which have taken place in the Libyan banking sector not only to evaluate performance but also to discuss the reasons for underperformance. However, importantly, this research explores the potential demand for Islamic financial services in Libya by also questioning relevant issues. The methodology of the study includes a literature review, data collection, analysis of available banking system statistics and semistructured interviews with experienced bankers. The empirical research in this study is based on a survey conducted in the city of Benghazi, one of the largest financial centres in the country. The empirical findings on Libyan banking demonstrate that the sector is plagued by problems which weaken its con 1 to the economy. The second part of the empirical results proved that there is a significant demand for Islamic banking in Libya. Although the respondents and interviewees were less familiar with Islamic banking products, services and principles, the study has proved Islamic banking in Libya is developing tangible roots.

Granting loans and credit facilities is considered as the main function of commercial banks in terms of providing liquidity to their clients on one hand, and achieving a sufficient profit for themselves on the other. In the credit facilities offered by the banks, when clients fail to pay their obligations, banks are exposed to non-performing loans. Similar to any other financial system, Libyan financial the questionnaires' respondents system is also faced with non-performing loans in particular in the Libyan state-owned commercial banking sector. This study, hence, aims to identify the non-performing loans in the Libyan stated owned commercial banking but also aims to determine the main types of loans and the reasons which led to non-performing loans in the Libyan state-owned commercial banks. In addition, this study aims to locate the appropriate ways which may be used to treat non-performing loans in the Libyan state-owned commercial banks. These aims are fulfilled through the perceptions and opinions of staff working in various levels in Libyan state-owned commercial banks.

No description available.

In the early 2000s, the Libyan government, in response to the economic adjustment program of the International Monetary Fund (IMF) and World Bank (WB), undertook a series of steps towards financial liberalisation and deregulation, reducing government control over economic institutions in order to create a favourable environment for improving the performance of the Libyan banking system. This study aims to investigate the impact of financial liberalisation on the efficiency and productivity of the Libyan commercial banks over the period 1998-2009. A two-stage method is employed in order to do so. In the first stage, the Data Envelopment Analysis (DEA) method is employed to estimate the technical efficiency of Libyan commercial banks using two inputs and two outputs. In addition, the Malmquist Productivity Index based on the DEA is used to estimate the changes in productivity of the Libyan banks over the entire period. In the second stage, the Tobit regression model is used to examine the potential determinants of efficiency of the Libyan banking system, and to explain variations in bank efficiency. The findings indicate that, in general, the technical efficiency of the Libyan banks was not high during the period of study. They have great potential to produce the same amount of outputs with fewer inputs than they actually employed. The technical efficiency of the Libyan banks declined during deregulation period due to the failure of management to adopt new environment in Libya and also due to the inability of Libyan bank managers to exploit available resources to produce outputs. A Grand Frontier analysis of efficiency indicates that there was a significant decline in their average technical efficiency, pure technical efficiency and scale efficiency during the liberalisation period. In general, state banks outperformed their counterparts, while the efficiency of large banks and small banks was higher than that of medium sized banks. A weak positive relationship between efficiency measures and size is also observed. Finally, the productivity of the Libyan banking sector slightly improved during liberalisation. The improvement in productivity during financial liberalisation was due to heavy investment in computerisation, new banking technology, information technology and internet banking. This helps to reduce costs and improve banking services. An interesting finding is that regional banks who transformed into private banks achieved higher productivity growth compared to their counterparts, while small banks and large banks achieved the highest productivity progress compared to medium banks.

Banking services are perhaps the largest industry that caters to -the needs of various segments of the population reflecting the diverse Diasporas of the society. Moreover perceived service quality tends to play a significant role in high involvement (high, interaction between customers and service providers) industries like banks. Also, banks often have long-term business relationships with customers. In addition, the banking sector is large enough to capture and represent almost all the critical features of the customer-perceived service quality and the critical dimensions of excellence that the management may have to encounter, in order to effectively manage a service organisation. However, there is considerable lack of literature with respect to service industry management, especially in the banking industry of developing economies. Therefore an analysis of banks in the Libya from a 'service-quality perspective' may sound interesting at this juncture. Such an investigation is vital for the bankers in order to enhance their business performance. Service quality plays an important role in the success of any organization generally but especially in the banking sector. This importance increased after a link was found between service quality and customer satisfaction, customer loyalty and financial performance. In the Libyan economy, the banking sector is one of the most important. Its significance increased after the 2003 lifting of the United Nations sanction. This was followed by entry to the sector of a number of domestic and multinational firms. Despite this increased competition, domestic banks are still widely considered to suffer from low levels of service quality. Therefore, the main purpose of this study is to examine and compare expectations and perceptions from customers and bankers regarding the service quality provided by the commercial public and private banks in Libya. After an extensive review of the extant literature related to the Parasurman, Berry and Zeithaml (1985) Gap Model and the use of the SERVQUAL instrument to measure service quality, this study found that there was a gap in the literature regarding empirical research using the extended Gap Model to evaluate service quality in the banking sector. Therefore, the extended Gap Model has been used to examine service quality in Libyan commercial banks and SERVQUAL used to measure the service gaps. The resulting instrument is intended to help these banks to measure their service quality and focus on the service quality dimensions of most importance to their customers. It is also expected that this instrument, and its results, will contribute to future research into service quality. Both questionnaires and semi-structured interviews were employed to fulfil the study objectives. The questionnaire aimed to investigate the implementation of service quality in the Libyan banks sector, while, semi-structured interviews with managers aimed to gain an understanding of themes which had emerged from the questionnaire. The findings of the present study have produced some important results. Firstly, there are significant differences between the Libyan private and public banking sectors in terms of customer and bankers' standpoints of service quality. Secondly, customers' expectations of banks services were higher in the private banks than in the public banks. Thirdly, customers' perceptions of the banks services were higher in the public banks compared with the private banks. Forthly, the gap between customers' expectations and perceptions of services provided by public and private banks is generally widest in public banks in the majority of the 22 items. Fifthly, employees' perceptions of customers' expectations in both banks had high scores in the bank's service quality. Finaly, the results also show that the interviews provided another layer of information that contributed extremely well to the overall understanding of the service quality in Libyan commercial banks. The study has made an original contribution to the academic and practical knowledge of service quality. This study contributes to the understanding of service quality in terms of the Libyan banking context. The added value of this study emanates from the fact the research was conducted in Libya (a developing country with an extremely limited amount of service quality research conducted therein), and the fact it measured and assessed the service quality in both Libyan private and public banking sectors which form, along with the central bank, the entire Libyan banking system.