Comparative Performance Study of Conventional and Islamic Banking in Pakistan

International Research Journal of Finance & Economics Issue 83 (2012)

17 Pages Posted: 16 Nov 2011 Last revised: 16 Dec 2012

See all articles by Muhammad Hanif

Muhammad Hanif

National University of Computer and Emerging Sciences (NUCES or FAST-NU) - FAST School of Business

Mahvish Tariq

National University of Computer and Emerging Sciences (NUCES or FAST-NU)

Arshiya Tahir

Independent

Wajeeh ul Momeneen

National University of Computer and Emerging Sciences (NUCES or FAST-NU)

Date Written: November 15, 2011

Abstract

The purpose of this empirical study is to analyze and compare the performance of Islamic and conventional banking in Pakistan and to find out which of the banking stream is performing better than other. For this study, sample of 22 conventional banks and 5 Islamic banks were selected. For in-depth understanding and sound comparison, key performance indicators were divided into external and internal bank factors. The external factor analysis includes studying the customer behavior and perception about both Islamic and conventional banking. Internal factor analysis includes measure of differences in performance of Islamic and conventional banks in terms of profitability, liquidity, credit risk and solvency. Nine financial ratios were used to gauge profitability, liquidity and credit risk; and a model known as “Bank-o-meter” is used to gauge solvency. Findings suggest in terms of profitability and liquidity conventional banking leads, while in credit risk management and solvency maintenance Islamic banking dominates. Motivating factors for customers of Islamic banking are the location and Shari’a compliance, while in case of conventional banking it is wide range of products and services.

Keywords: Performance evaluation, Islamic banking, Pakistan, customer survey, profitability, liquidity, credit risk, solvency, Shari'a Compliance

JEL Classification: G21

Suggested Citation

Hanif, Muhammad and Tariq, Mahvish and Tahir, Arshiya and Momeneen, Wajeeh ul, Comparative Performance Study of Conventional and Islamic Banking in Pakistan (November 15, 2011). International Research Journal of Finance & Economics Issue 83 (2012), Available at SSRN: https://ssrn.com/abstract=1959950

Muhammad Hanif (Contact Author)

National University of Computer and Emerging Sciences (NUCES or FAST-NU) - FAST School of Business ( email )

A.K. Brohi Road
Sector H/11-4
Islamabad, 44000
Pakistan
+92 (051) 111 128 128 (Phone)

HOME PAGE: http://https://scholar.google.ae/citations?user=Q4gINjEAAAAJ&hl=en

Mahvish Tariq

National University of Computer and Emerging Sciences (NUCES or FAST-NU) ( email )

Sector H-11/4
A.K. Barohi Road
Islamabad, 44000
Pakistan

Arshiya Tahir

Independent ( email )

Wajeeh ul Momeneen

National University of Computer and Emerging Sciences (NUCES or FAST-NU) ( email )

Sector H-11/4
A.K. Barohi Road
Islamabad, 44000
Pakistan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
3,436
Abstract Views
10,229
rank
4,205
PlumX Metrics