The Determinants of World Islamic Banks’ Efficiency: Does Country Income Level have an Impact? Mohamad Akbar Noor Mohamad Noor  Nor Hayati Bt Ahmad  Abstract The paper investigates the efficiency of 78 Islamic banks sectors in 25 countries during the period of 1997-2009. The efficiency estimates of individual banks are evaluated using the non-parametric Data Envelopment Analysis (DEA) approach. The empirical findings seem to suggest that the World Islamic banks have exhibited high pure technical efficiency. The studies find positive relationship between bank efficiency and loans intensity, size, capitalization, and profitability. A multivariate analysis based on the Tobit model reinforces these findings. The finding for LOW income country is negative and statistically significant at 1% level. While for MEDIUM positive and not significant while lastly HIGH were negative and not significant. This indicated that Islamic banks at LOW and HIGH income country were inefficient compare to MEDIUM income country. JEL Classification: G21; G28 Keywords: Islamic Banks, Banks Efficiency, Data Envelopment Analysis (DEA), Multivariate analysis. 1.0 INTRODUCTION Islamic banks today exist in all parts of the world, and are looked upon as a viable alternative system, which has many things to offer. While it was initially developed to fulfill the needs of Muslims, Islamic banking has now gained universal acceptance. Islamic banking is recognized as one of the fastest growing sector in economy. Since the inception of the first Islamic bank in Egypt in 1963, Islamic banking has rapidly grown all over the world. The number of Islamic financial institutions worldwide has risen to over 300 today in more than 75 countries with Bahrain and Malaysia the  Corresponding author: College of Business, Universiti Utara Malaysia. Mailing address: SAPURA Technology Berhad, Level 9, Sapura@Mines, No. 7 Jalan Tasik, The Mines Resort City, 43300 Seri Kembangan, Selangor, Malaysia. e-mail: mohamadakbarnoor@yahoo.co.uk Tel: 603- 8949 7789, Fax: 603-8949 8007.  Professor of Banking and Risk Management, College of Business, Universiti Utara Malaysia. Mailing address: Professor Office, College of Business, Universiti Utara Malaysia, 06010 Sintok, Kedah, e-mail: ayati@uum.edu.my, Tel: 604- 9286404 ext 6403, Fax: 604-9285762.