scholarly journals A Comparative Financial Ratio Analysis Between Conventional and Islamic Banks in GCC

2021 ◽  
Vol 11 (4) ◽  
pp. 12
Author(s):  
Arindam Banerjee
Keyword(s):  
Cash Flow ◽  
Banking System ◽  
Design Activity ◽  
Islamic Banks ◽  
Financial Ratio ◽  
Financial Ratio Analysis ◽  
Financial Framework ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

Banking framework establishes the central mainstay of any economy. Banks functions as monetary conduits between sectors that have abundance reserves and those that are in deficiency. The historical backdrop of banking in the Gulf Cooperation Council (GCC) traces all the way back to 1918 with the foundation of the primary bank in Bahrain. The territorial financial evolution is attributable to oil abundance and loaning business that spotlights on building, land and client advances. Throughout the long term, the financial framework worldwide has advanced in its contributions to suit the changing customer requests. One of the essential determinants of this change came about because of the strict convictions of individuals bringing about the remarkable development of Islamic Banking System. The prevalence of these banks are in nations with critical Muslim populace like Iran, Pakistan and Sudan but not limited to them. Islamic banks work under Sharia standards of hazard sharing and premium preclusion as appeared differently in relation to customary banks that purchase cash-flow to pool assets and offer cash-flow to produce revenue pay or benefit. This paper applies banks' endogenic elements identified with their monetary record and pay explanation and utilizing an aggregate of 24 financial ratios relating to the banks’ performance and seeks to thoroughly analyze the same among customary and Islamic banks. This examination clarifies the design, activity and the board of traditional banks in the GCC combined with the working of Islamic banks. The paper likewise intends to decide the beneficial and proficient banks among the chosen sample. The study incorporates 20 institutions, similarly dispersed among Islamic and customary banks utilizing information between the time of 2014 - 2017. The example is comprehensively ordered dependent on benefit ratios, proficiency ratios, asset indicator ratios and risk ratios. Further sub categorization is done to show up at an aggregate of 24 ratios. An independent T-test is used to determine a substantial ratio between Islamic and conventional banks.

Are Islamic Banks Really More Solvent Than Conventional Banks in a Financially Stable Period?

2019 ◽  
Vol 9 (11) ◽  
pp. 346-366
Author(s):  
Achraf Haddad ◽  
Anis El Ammari ◽  
Abdelfettah Bouri
Keyword(s):  
Stock Exchanges ◽  
Islamic Banks ◽  
Financial Ratio ◽  
Stable Period ◽  
Financial Ratio Analysis ◽  
Two Samples ◽  
Operative Evaluation ◽  
Conventional Banks ◽  
The Comparative Study ◽  
Conventional And Islamic Banks

The knowledge value produced by this research was established in particular by the methodological challenges of the comparative study. Based on a process of bibliographic research, available conditional observation and the using of the Financial Ratio Analysis Method, the objective of this article is to solve the ambiguity of previous comparative research and innovated an equiprobable comparison between the solvencies of conventional and Islamic banks over the period (2010-2018). Our study is not only a matter of dealing generically with the financial solvency of conventional and Islamic banks but also, we analyzed the inherent implications that may alter the results of a banks’ operative evaluation. Two samples were taken from two reference populations existing in the selected countries. The choice of banks is limited to countries whose banking systems incorporate both Islamic and conventional banks. Subsequently, each list bank was reduced based on qualitative and quantitative filtering criteria. Therefore, each conventional bank has its closest Islamic equivalence. This restriction reduced the sample size to 63 banks each. The selected banks are all large and listed in different stock exchanges. In conclusion, we found that conventional banks are more solvent than Islamic banks during a financial stable period.

scholarly journals MONETARY POLICY PASS-THROUGH, EXCESS LIQUIDITY AND PRICE SPILLOVER: A COMPARATIVE STUDY OF CONVENTIONAL AND ISLAMIC BANKS OF PAKISTAN

2019 ◽  
Vol 5 (2) ◽  
Author(s):  
Omer Omer
Keyword(s):  
Monetary Policy ◽  
Banking System ◽  
Islamic Banks ◽  
Excess Liquidity ◽  
Retail Prices ◽  
Monetary Policy Shock ◽  
Pass Through ◽  
Using Data ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

This study investigates the comparative pass-through of policy rate to the retailprices, spillover of prices between Islamic and conventional banking systems, and theimpact of excess liquidity on these pass-throughs using data from interbank marketof Pakistan. The results suggest that the monetary policy shock affect retail prices ofIslamic banks similar to conventional banks, confirming the results of earlier studies.Moreover, there is a strong spillover between the prices of two systems; Islamicbanks are following (leading) the conventional banks in pricing the lending (deposit)products. Islamic bank has acquired advantage in the deposit pricing by taping thereligious depositors, which also may have promoted financial inclusion therebycontributing to the economic growth and improved income distribution in the society.Our findings suggest that the presence of excess liquidity have no effect on passthroughof policy rate in the Islamic system, which is contrary to the prevalent notion.However, excess liquidity significantly affects the spillovers of prices between thesystems. These results support the hypothesis that the Islamic banks are investing ininterest-based government securities indirectly via conventional banks. Our findingsmay help in enhancing the regulatory efficiency of the central banks and the conduct ofthe monetary policy in the countries where dual banking system exists.

scholarly journals A Technical Recitation on Efficiency of Islamic and Traditional Banking System in Kingdom of Bahrain

2019 ◽  
Vol 8 (10) ◽  
pp. 4424-4431
Keyword(s):  
Banking System ◽  
Vital Role ◽  
Return On Assets ◽  
Return On Equity ◽  
Financial Ratio ◽  
Financial Ratio Analysis ◽  
Conventional Banks ◽  
The One ◽  
Financial Transactions ◽  
Revenue Efficiency

Banking industry plays a vital role in the for economic development of a country. This research aims at identifying which banking regime proves to be more efficient and its significance using Financial Ratio Analysis (FRA), composed of cost efficiency, revenue efficiency and profit efficiency ratios along with the One-way ANOVA test. The traditional banking system governs the financial sector by dealing with the majority of financial transactions of a country and the existence of Islamic and conventional banks has contributed for the development of the economy. The present study focuses on the comparative analysis of financial performance of Islamic and traditional banks in terms of cost and income in Bahrain. The study uses financial tools like profitability, liquidity and solvency, commitment to economy and community, efficiency and productivity of both streams of banks. The findings indicate that the traditional banking system is superior in terms of cost, revenue and profit efficiencies, furthermore, the results of the multiple regression analysis on the banks’ return on assets and return on equity imply that the efficiency of Islamic banks have more influence on their profitability compared to their traditional counterparts. Inflation had minimal effect on the efficiency of both banking system.

scholarly journals Parameters of Profitability: Evidence From Conventional and Islamic Banks of Bangladesh

2018 ◽  
Vol 8 (4) ◽  
pp. 158
Author(s):  
K. M. Golam Muhiuddin ◽  
Nusrat Jahan
Keyword(s):  
Commercial Banks ◽  
Banking System ◽  
Specific Factor ◽  
Economic Factors ◽  
Islamic Banks ◽  
Specific Factors ◽  
Conventional Banks ◽  
The Impact ◽  
Bank Specific Factors ◽  
Conventional And Islamic Banks

This paper evaluates the commercial banks of Bangladesh in terms of profitability dimension of performance and also examines the impact of selected determinants and banking system on this dimension of performance. Evaluation of trend in profitability of listed commercial banks of Bangladesh reveals that, on an average, profitability is exhibiting a decreasing trend over the selected period; however, the profitability performance of Islamic banks remained rather high compared to Conventional banks. Profitability measured by Return on Asset is found to be significantly affected by the bank-specific factors, industry-specific factor and the banking system. However, macro-economic factors evidently have no significant impact on profitability of commercial banks of Bangladesh.

scholarly journals A comparative analysis of financial performance of Islamic banks vis-à-vis conventional banks: evidence from Pakistan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Tariq Majeed ◽  
Abida Zainab
Keyword(s):  
Comparative Analysis ◽  
Financial Performance ◽  
Islamic Banks ◽  
Financial Industry ◽  
Content Type ◽  
Financial Ratio ◽  
Financial Ratio Analysis ◽  
Country Analysis ◽  
And Performance ◽  
Conventional Banks

PurposeIn recent years, the fast growth of Islamic banks (IBs) has generated debates among policymakers and economists about the sustainability and performance of these institutions. This paper aims to undertake a comparative analysis of the financial performance of IBs and conventional banks (CBs) in Pakistan over the period 2008–2019 to evaluate how IBs are faring compared to their conventional peers.Design/methodology/approachThis paper considers financial ratio analysis (FRA) to analyze and compare the performance of the top-10 IBs and CBs operating in Pakistan. The sample includes five full-fledged IBs and five CBs which offer Islamic windows in Pakistan. We have selected the top-5 best performing CBs offering Islamic windows. This study offers a comparative analysis of Islamic v/s conventional banks.FindingsThe results show that Islamic banks are better capitalized, less risky and have higher liquidity. In contrast, the profit of Islamic banks is found lower than CBs. The logical reasoning behind these performance indicators has been discussed in detail.Research limitations/implicationsThe study has provided an analysis of financial performance only for Pakistan. A cross-country analysis could be more representative of the performance of Islamic Banks.Practical implicationsThe size of Islamic banking industry should be enhanced by opening new branches and promoting Islamic finance literacy.Originality/valueThe study assists investors, borrowers and managers in making better decisions. It also provides the latest valuable information to regulators and policymakers in making rules and policies for the financial industry in Pakistan.

scholarly journals EVALUATING STABILITY IN DUAL BANKING SYSTEM: COMPARISON BETWEEN CONVENTIONAL AND ISLAMIC BANKS IN MALAYSIA

2019 ◽  
Vol 7 (2) ◽  
pp. 510-518
Author(s):  
Omar Alaeddin ◽  
Ahmed Khattak ◽  
Moutaz Abojeib
Keyword(s):  
Financial Crises ◽  
Banking Sector ◽  
Banking System ◽  
Central Banks ◽  
Islamic Banks ◽  
Policy Makers ◽  
Banking Stability ◽  
Widespread Belief ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

Purpose of Study: This paper aims to explore whether Islamic banks are more stable when compared with conventional banks in a dual banking system. Methodology: This research employs Pooled OLS methodology for 42 banks, including 27 conventional banks and 15 Islamic banks, for the period of 2005-2016. Results: The study suggests that Islamic banks are less stable compared to conventional banks in overall banking sector. Furthermore, it is found that big Islamic banks are less stable than big conventional banks and small Islamic banks are less stable than small conventional banks. The results disapprove of the widespread belief that Islamic banks are more stable and more resilient to adverse shocks in the financial crisis. Moreover, while investigating the shift in overall level of banking stability with respect to financial crises, regardless of bank type and bank size, it is observed that the overall banking stability is enhanced after the financial crises. This is intriguing and a sigh of relief for policy makers and regulators in the country. Implications/Applications: This research is of contribution to policy makers and central banks in the countries with highly dual banking environment and for the central banks striving to become International Islamic financial hub.

Determinants of bank margins in a dual banking system

2017 ◽  
Vol 43 (6) ◽  
pp. 630-645 ◽  
Author(s):  
Siew Peng Lee ◽  
Mansor Isa
Keyword(s):  
Credit Risk ◽  
Market Share ◽  
Emerging Market ◽  
Banking System ◽  
Operating Costs ◽  
Islamic Banks ◽  
Content Type ◽  
Conventional Banks ◽  
Interest Payments ◽  
Conventional And Islamic Banks

Purpose The purpose of this paper is to determine of bank margins for conventional and Islamic banks in the dual banking system in Malaysia. Design/methodology/approach The study uses unbalanced panel data for 20 conventional banks and 16 Islamic banks over the period 2008-2014. The dynamic two-step GMM estimator technique introduced by Arellano and Bond (1991) is applied. Findings The results suggest that there are significant similarities with minor differences in terms of factors determining bank margins between conventional and Islamic banks in Malaysia. The margins for conventional banks are influenced by operating costs, efficiency, credit risk, degree of risk aversion, market share, size of operation, implicit interest payments and funding costs. For Islamic banks, the margin determinants are found to be operating costs, efficiency, credit risk, market share and implicit interest payments. This means that more factors influence the margins in conventional banks compared to Islamic banks. Although bank diversification activities have increased in recent years, their impact on bank margins is minimal. Practical implications The results suggest that improving operational costs, operational efficiency and credit risk management, and minimising implicit interest payments would be the best strategy to enhance the bank margins for both conventional and Islamic banks. The results also have important policy implications on the necessity to expand the size of Islamic banking in Malaysia. Originality/value There are relatively few studies concerning determinants of bank margins in emerging markets. The present study adds to the literature by presenting evidence from Malaysia, an emerging market with a dual banking system. This allows us to explore the similarities and differences between conventional and Islamic banks in Malaysia in respect of determinants of the margins.

scholarly journals Financial performance of conventional and Islamic banks in Bahrain: a comparative study

2019 ◽  
Vol 14 (4) ◽  
pp. 192-205 ◽  
Author(s):  
Sayel Ramadhan ◽  
Mohammad Selim ◽  
Ahmad Sahwan
Keyword(s):  
Comparative Study ◽  
Financial Performance ◽  
Islamic Banks ◽  
Return On Equity ◽  
Financial Ratio ◽  
Financial Ratio Analysis ◽  
Risk Cost ◽  
Conventional Banks ◽  
Asset Size ◽  
The Relationship

The main purpose of this study is to identify the variables that influence the financial performance of both types of banks, Islamic and conventional, and compare their financial performance over the period of 2003–2016. Banks listed on the Bahrain Bourse as of December 31, 2016 were used in the study, with a total of seven banks, of which three are Islamic and four are conventional. To make an appropriate comparative study, financial ratio analysis is used. Multiple regression and paired sample t-test are used to analyze the data. Return on assets (ROA) and return on equity (ROE) are considered as the basis for measuring financial performance and are set as dependent variables. The analysis of the results shows that conventional banks perform better than Islamic banks in terms of profitability. The results also show that ROA is significantly related to risk, cost of intermediation and efficiency ratios, while ROE is highly influenced by risk ratios only. Moreover, it was found out that the relationship between asset size and the performance of banks is insignificant, while the relationship between the number of branches and both ROA and ROE is significant.

scholarly journals ANALISIS PERBANDINGAN KINERJA KEUANGAN BANK UMUM KONVENSIONAL DAN BANK SYARIAH ( STUDI 3 BUAH BANK UMUM KONVENSIONAL DAN 3 BUAH BANK UMUM SYARIAH )

2019 ◽  
Author(s):  
Irfan Azwar
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Quantitative Research ◽  
Sample Selection ◽  
Financial Ratios ◽  
Islamic Banks ◽  
Test Analysis ◽  
Financial Ratio ◽  
Financial Ratio Analysis ◽  
Conventional Banks

This study aims to compare the financial performance of conventional commercial banks with sharia commercial banks in Indonesia in the period 2012-2016 using financial ratios. The financial ratios used consist of CAR, NPL, ROA, BOPO and LDR. The type of research used in this study is quantitative research. The data used in this study are data of bank financial statements for 2012 to 2016 obtained through several websites from the bank concerned. The sampling method used was purposive sampling, based on the sample selection criteria, obtained a sample of 6 banks, 3 banks for Islamic commercial banks and 3 banks for conventional commercial banks. Data analysis techniques used to compare the performance of conventional commercial banks with Islamic commercial banks are normality test and independent sample t-test. Analysis shows that there are significant differences between the financial performance of conventional banks and Islamic banks. Based on the comparison of financial ratio analysis, conventional bank financial performance is better in terms of CAR, NPL, ROA and BOPO ratios, while the financial performance of Islamic banks is better in terms of LDR ratio

scholarly journals An Empirical Study into Comparing Conventional and Islamic Banks in the UAE

2020 ◽  
Vol 5 (2) ◽  
pp. 11-31
Author(s):  
Manoj Kapur
Keyword(s):  
Risk Sharing ◽  
Balance Sheet ◽  
Banking System ◽  
Jel Classification ◽  
Islamic Banks ◽  
Internal Factors ◽  
Financial Characteristics ◽  
Conventional Banks ◽  
Asset Quality ◽  
Conventional And Islamic Banks

Banking system constitutes the fundamental pillar of every economy. Banks acts financial intermediaries between sectors that have excess funds and those that are in deficit. Islamic banks operate under Sharia principles of risk sharing and interest prohibition as contrasted with conventional banks that buy capital to pool funds and sell capital to generate interest income or profit. This paper applies banks’ internal factors related to their balance sheet and income statement and using a total of 23 financial ratios pertaining to the internal factors, it attempts to compare and contrast between conventional and Islamic banks. This research explains the structure, operation and management of banks in the UAE coupled with the functioning of Islamic banks. The paper also aims to determine the profitable and efficient banks among the chosen sample. The sample includes 12 banks, equally distributed between Islamic and conventional banks using data between the periods of 2014 - 2018. The sample is broadly categorized based on profitability ratio, efficiency ratio, asset indicator ratio and risk ratios. Correlation and Regression analysis is used to determine a substantial ratio analysis between conventional and Islamic banks. Results from the study reveal indicators of financial characteristics such as profitability ratios, efficiency ratios, asset quality indicators and risk/ risk management ratios. The results clarify that Islamic banks are operationally efficient and profitable because of risks sharing and greater dependency on deposits capital. However, on an overall basis, the ratios indicate conventional banks have higher scores than their counterparts. JEL Classification Codes: F37.          

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