Banking
Journal of Money, Investment and Banking ISSN 1450-288X Issue 22 (2011) © EuroJournals Publishing, Inc. 2011 http://www.eurojournals.com/JMIB.htm
The Performance Analysis of Islamic and Conventional Banks: The Pakistan’s Perspective
Mian Muhammad Ashraf M. Phil Scholar, Superior University of Lahore E-mail: Ashraf.iub@gmail.com Tel: 0092-300-7808066 Zia-ur-Rehman Lecturer, Hailey College of Commerce University of the Punjab, Lahore E-mail: Ziaurrehman_hailey@hotmail.com Abstract The intent of this endeavor is to compare and analyze performance of Islamic banking and conventional banking system through use of financial measures. For this purpose two banks each from Islamic and conventional Pakistani banking system are selected. Primary objectives of this study are to depict domino effect for the performance of interest free banking system, to consider the concept of profit and loss sharing of Islamic banking, comparison of banking frame work and conceptual comparison. The performance of Islamic banks ' of Pakistan is scrutinized by using bank level data from 2007-2010. For research purpose authors have used ratios of: (1) profitability (2) earnings (3) liquidity (4) credit risk and (5) assets activity to compare performance of Islamic banking and conventional banking system. The research ascertains that banking performance of Islamic banks is less effective because of augmented operating cost and inefficiency of management. Further this study can be helpful and beneficial for management of Islamic banks in Pakistan for performance enhancement and stability.
Keywords: Islamic Banks, Conventional banks, Banking framework, Performance Analysis, Islamic Shariah.
Introduction
Before 1970’s the term Islamic financial system or Islamic banking was relatively a new idea for the Muslim world. All previous commercial activities and transaction were based on requirements of Islamic principles i.e. the system of Interest free or Islamic banks. Un doubtfully,
The Performance Analysis of Islamic and Conventional Banks: The Pakistan’s Perspective
Mian Muhammad Ashraf M. Phil Scholar, Superior University of Lahore E-mail: Ashraf.iub@gmail.com Tel: 0092-300-7808066 Zia-ur-Rehman Lecturer, Hailey College of Commerce University of the Punjab, Lahore E-mail: Ziaurrehman_hailey@hotmail.com Abstract The intent of this endeavor is to compare and analyze performance of Islamic banking and conventional banking system through use of financial measures. For this purpose two banks each from Islamic and conventional Pakistani banking system are selected. Primary objectives of this study are to depict domino effect for the performance of interest free banking system, to consider the concept of profit and loss sharing of Islamic banking, comparison of banking frame work and conceptual comparison. The performance of Islamic banks ' of Pakistan is scrutinized by using bank level data from 2007-2010. For research purpose authors have used ratios of: (1) profitability (2) earnings (3) liquidity (4) credit risk and (5) assets activity to compare performance of Islamic banking and conventional banking system. The research ascertains that banking performance of Islamic banks is less effective because of augmented operating cost and inefficiency of management. Further this study can be helpful and beneficial for management of Islamic banks in Pakistan for performance enhancement and stability.
Keywords: Islamic Banks, Conventional banks, Banking framework, Performance Analysis, Islamic Shariah.
Introduction
Before 1970’s the term Islamic financial system or Islamic banking was relatively a new idea for the Muslim world. All previous commercial activities and transaction were based on requirements of Islamic principles i.e. the system of Interest free or Islamic banks. Un doubtfully,
References: Journal of Money, Investment and Banking – Issue 22 (2011) 110 Table 1: Journal of Money, Investment and Banking – Issue 22 (2011) Figure 6: Meezan Bank Income Statement Journal of Money, Investment and Banking – Issue 22 (2011) Journal of Money, Investment and Banking – Issue 22 (2011) Figure 11: Muslim Commercial Bank Balance Sheet