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Pricing Linkage between Islamic Banking and Conventional Banking:The Case of Bangladesh

Author

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  • Sarwar Uddin Ahmed

    (Independent University, Bangladesh (IUB),Dhaka,Bangladesh)

  • Md. Ashikur Rahman

    (Independent University, Bangladesh (IUB),Dhaka,Bangladesh)

  • Samiul Parvez Ahmed

    (Independent University, Bangladesh (IUB),Dhaka,Bangladesh)

  • G. M. Wali Ullah

    (Independent University, Bangladesh (IUB),Dhaka,Bangladesh)

Abstract

Islamic banking is based on profit and loss mechanism where the use of interest is prohibited. Unlike conventional banks, these banks do not charge a specific rate of interest, rather provides financing in exchange for profit sharing. However, there are studies claiming that, in practice, Islamic banking is same as conventional banking with regard to the use of interest. It is also claimed that, Islamic deposits are not interest-free, but are closely attached to conventional deposits.On this background, the objective of this study is to examine the relationship between pricing in Islamic banks vis-à-vis conventional banks by taking the case of Bangladesh. We have used monthly data during the period of 2009-2013. The findings of the study showed that, there is no statistically significant difference between the monthly average lending rates of Islamic banks and conventional banks. However, there is significant difference between depositrates. The existence of causal relationship was inconclusive, and requires further analysis.

Suggested Citation

  • Sarwar Uddin Ahmed & Md. Ashikur Rahman & Samiul Parvez Ahmed & G. M. Wali Ullah, 2014. "Pricing Linkage between Islamic Banking and Conventional Banking:The Case of Bangladesh," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 3(4), pages 84-97, October.
    • Handle: RePEc:rbs:ijfbss:v:3:y:2014:i:4:p:84-97
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    References listed on IDEAS

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    Cited by:

    1. Achraf Haddad, 2023. "Impact of financial development initiatives on the banks’ financial performance: comparative study in the stakeholders’ theory framework," SN Business & Economics, Springer, vol. 3(1), pages 1-27, January.
    2. Mabid Ali Al-Jarhi, 2020. "Reforming Islamic Finance إصلاح المالية الإسلامية," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 101-107, July.
    3. Al-Jarhi, Mabid, 2017. "Islamic Finance at Crossroads," MPRA Paper 88555, University Library of Munich, Germany, revised Aug 2018.
    4. Sarwar Uddin Ahmed & G. M. Wali Ullah & Samiul Parvez Ahmed & Ashikur Rahman, 2016. "An Empirical Study on Corporate Governance and Islamic Bank Performance: A Case Study of Bangladesh," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 5(4), pages 01-09, July.
    5. ALJARHI, Shadia, 2020. "Reforming Islamic Finance," MPRA Paper 103393, University Library of Munich, Germany.

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