IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2016-04-13.html
   My bibliography  Save this article

Performance of Islamic and Conventional Banks in Pakistan: A Comparative Study

Author

Listed:
  • Shahab Aziz

    (Credit Manager, Bank of Khyber, Pakistan,)

  • Shahab Aziz

    (PhD Scholar, University Technology Malaysia (UTM), Malaysia)

  • Maizaitulaidawati Md Husin

    (International Business School, Universiti Teknologi Malaysia (UTM), Malaysia,)

  • Shujahat Haider Hashmi

    (Faculty of Management and Social Sciences, Capital University of Science and Technology (CUST), Pakistan)

Abstract

This study is conducted to find out financial performance of Islamic and conventional banks operating in Pakistan for the year 2006-2014. For comparison purpose five Islamic and five similar sized conventional banks have been selected. The comparison has been made on average values of different ratios of both Islamic and conventional banks. The comparison shows that Islamic banks performance has been better in terms of efficiency, return and asset quality. However Islamic banks are struggling in terms of advances, investment, liquidity, deposits and capital as conventional banks performance is better in these areas. Islamic banks are charging higher spread and share of distributable income to depositors is far less as compared to conventional banks. Islamic banks need to focus on fair distribution of profit to its depositors in order to increase its credibility and help in achieving overall Islamic socio economic objectives of justice and equality. Islamic banks should focus on new products development and innovative solutions to meet client's needs, also Islamic banks needs to strengthen their equity base.

Suggested Citation

  • Shahab Aziz & Shahab Aziz & Maizaitulaidawati Md Husin & Shujahat Haider Hashmi, 2016. "Performance of Islamic and Conventional Banks in Pakistan: A Comparative Study," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1383-1391.
    • Handle: RePEc:eco:journ1:2016-04-13
    as

    Download full text from publisher

    File URL: http://www.econjournals.com/index.php/ijefi/article/download/2603/pdf
    Download Restriction: no
    File URL: http://www.econjournals.com/index.php/ijefi/article/view/2603/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Iqbal, Munawar, 2001. "Islamic and Conventional Banking in the Nineties: A Comparative Study," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 8, pages 1-27.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maha Haroon & Danish Ahmed Siddiqui, 2019. "Determinants of Allocative, Cost and Scope Efficiencies: A Comparative Analysis of Banks and Insurance Companies in Pakistan," Business Management and Strategy, Macrothink Institute, vol. 10(2), pages 285-312, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Neifar, Malika, 2020. "Interest-free versus Conventional banks- A Comparative Study using Linear and Nonlinear Panel Regression: Empirical Evidence from Turky and 6 MENA countries," MPRA Paper 101028, University Library of Munich, Germany.
    2. Belkhir, Mohamed & Grira, Jocelyn & Hassan, M. Kabir & Soumaré, Issouf, 2019. "Islamic banks and political risk: International evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 39-55.
    3. Abdelsalam, Omneya & Elnahass, Marwa & Ahmed, Habib & Williams, Julian, 2022. "Asset securitizations and bank stability: Evidence from different banking systems," Global Finance Journal, Elsevier, vol. 51(C).
    4. Yomna Daoud & Aida Kammoun, 2020. "Financial Stability and Bank Capital: The Case of Islamic Banks," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 361-369.
    5. Selim DEMEZ & Murat USTAOĞLU & Ahmet İNCEKARA, 2018. "Determining and Examining the Performance Index of Dual Banking System: A Panel Data Comparative Analyse for Turkey," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 68(2), pages 221-241, December.
    6. Bader, Mohammed Khaled I. & Mohamad, Shamsher & Ariff, Mohamed & Hassan, Taufiq, 2008. "Cost, Revenue, And Profit Efficiency Of Islamic Versus Conventional Banks: International Evidence Using Data Envelopment Analysis," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 15, pages 24-76.
    7. Isaev, Mirolim & Masih, Mansur, 2017. "Macroeconomic and bank-specific determinants of different categories of non-performing financing in Islamic banks: Evidence from Malaysia," MPRA Paper 79719, University Library of Munich, Germany.
    8. Zheng, Changjun & Moudud-Ul-Huq, Syed & Rahman, Mohammad Morshedur & Ashraf, Badar Nadeem, 2017. "Does the ownership structure matter for banks’ capital regulation and risk-taking behavior? Empirical evidence from a developing country," Research in International Business and Finance, Elsevier, vol. 42(C), pages 404-421.
    9. Neifar, Malika, 2020. "Long run comparison analysis and Short run Stability sensitivity: Empirical Evidence from Tunisian Banks," MPRA Paper 101029, University Library of Munich, Germany.
    10. Saida Daly & Mohamed Frikha, 2016. "Banks and economic growth in developing countries: What about Islamic banks?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1168728-116, December.
    11. Osama Omar Jaara & Bassam Omar Jaara & Jamal Shamieh & Usama Adnan Fendi, 2017. "Liquidity Risk Exposure in Islamic and Conventional Banks," International Journal of Economics and Financial Issues, Econjournals, vol. 7(6), pages 16-26.
    12. Nurhafiza Abdul Kader Malim & M.K. Normalini, 2018. "Factors Influencing the Margins of Islamic Banks," Global Business Review, International Management Institute, vol. 19(4), pages 1026-1036, August.
    13. Grira, Jocelyn & Hassan, M. Kabir & Soumaré, Issouf, 2016. "Pricing beliefs: Empirical evidence from the implied cost of deposit insurance for Islamic banks," Economic Modelling, Elsevier, vol. 55(C), pages 152-168.
    14. repec:ipg:wpaper:2014-093 is not listed on IDEAS
    15. Al-Jarhi, Mabid, 2004. "Islamic Finance: An Equitable and Efficient Option," MPRA Paper 55765, University Library of Munich, Germany.
    16. Neifar, Malika, 2020. "Different dimensions Bank performance comparisons IBs vs CBs – Quatar case," MPRA Paper 101375, University Library of Munich, Germany.
    17. Izani, Izahairani & Masih, Mansur, 2017. "Do islamic bank deposits depend on total islamic bank assets or the other way around ?," MPRA Paper 106218, University Library of Munich, Germany.
    18. Katarzyna Kubiszewska & Rafał Komorowski, 2016. "An Assessment of Islamic Banking in Bosnia and Herzegovina – a comparative analysis using the CAMELS approach," International Economics, University of Lodz, Faculty of Economics and Sociology, issue 16, pages 367-387, December.
    19. Achraf Haddad & Anis El Ammari & Abdelfettah Bouri, 2019. "Comparative Study of Ambiguity Resolution between the Efficiency of Conventional and Islamic Banks in a Stable Financial Context," International Journal of Economics and Financial Issues, Econjournals, vol. 9(5), pages 111-129.
    20. Safa Jallali & Faten Zoghlami, 2021. "The relevance of risk management for bank profitability: evidence from selected Islamic banks," International Journal of Management and Decision Making, Inderscience Enterprises Ltd, vol. 20(2), pages 123-143.
    21. Aysan, Ahmet F. & Disli, Mustafa & Duygun, Meryem & Ozturk, Huseyin, 2018. "Religiosity versus rationality: Depositor behavior in Islamic and conventional banks," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 1-19.

    More about this item

    Keywords

    Financial Performance; Financial Ratios; Comparison; Islamic Banks; Conventional Banks;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2016-04-13. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.