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

International Journal of Finance & Banking Studies (IJFBS), Vol. 3 No. 4, 2014 ISSN: 2147-4486

14 Pages Posted: 7 Nov 2014

See all articles by Sarwar Uddin Ahmed

Sarwar Uddin Ahmed

Independent University, Bangladesh (IUB)

Ashikur Rahman

Independent University, Bangladesh (IUB)

Samiul Ahmed

Independent University, Bangladesh (IUB)

G. M. Wali Ullah

Independent University, Bangladesh (IUB)

Date Written: October 1, 2014

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 deposit rates. The existence of causal relationship was inconclusive, and requires further analysis.

Keywords: Islamic banking, conventional banking, pricing, profit and loss sharing, Bangladesh

Suggested Citation

Ahmed, Sarwar Uddin and Rahman, Ashikur and Ahmed, Samiul and Ullah, G. M. Wali, Pricing Linkage between Islamic Banking and Conventional Banking: The Case of Bangladesh (October 1, 2014). International Journal of Finance & Banking Studies (IJFBS), Vol. 3 No. 4, 2014 ISSN: 2147-4486, Available at SSRN: https://ssrn.com/abstract=2520087

Sarwar Uddin Ahmed

Independent University, Bangladesh (IUB) ( email )

Plot 16 Block B, Aftabuddin Ahmed Road Bashundhara
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HOME PAGE: http://www.sb.iub.edu.bd/

Ashikur Rahman

Independent University, Bangladesh (IUB)

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Bashundhara R/A
Dhaka, 1212
Bangladesh

Samiul Ahmed

Independent University, Bangladesh (IUB) ( email )

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Bashundhara R/A
Dhaka, 1212
Bangladesh

G. M. Wali Ullah (Contact Author)

Independent University, Bangladesh (IUB) ( email )

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Bashundhara R/A
Dhaka, 1212
Bangladesh
+8801793-514567 (Phone)

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