Comparative Analysis of Islamic Banking and Conventional Banking

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COMPARATIVE ANALYSIS OF PERFORMANCE OF BANKS IN MALAYSIA:ISLAMIC AND CONVENTIONAL BANKS FROM 2006 to 2010

By:
SATHESH A/L GOPINATHAN
B0702069

Graduation Project Submitted to the Department of Business Studies, HELP University College, in Partial Fulfillment of the Requirements for the Degree of Bachelor of Business (Finance) Hons

OCTOBER 2011

DECLARATION OF ORIGINALITY & WORD COUNT
I hereby declare that the following graduation project is actually based on my original work except for the quotation and citations which I have duly acknowledged. I can also declare that it has not been previously submitted for another course at the HELP University College. The word count for this project is 9937 words.

............................
SATHESH A/L GOPINATHAN
Date: 03/10/2011

ABSTRACT
COMPARATIVE ANALYSIS OF PERFORMANCE OF BANKS IN MALAYSIA:ISLAMIC AND CONVENTIONAL BANKS FROM 2006 to 2010 By
Sathesh A/L Gopinathan
October 2011.
Supervisor: Mr.Valliappan Kasi.

This research paper’s main aim is to find out which banking system,(Islamic or conventional) performed better overall.11 different ratios were used and they were grouped into 4 different categories which are Profitability,Liquidity,Risk and solvency,and Efficiency. 5 banks from Islamic will be compared with another 5 banks from conventional banking for a period of 5 years that is from years 2006 to 2010. To see whether there is a difference in the performance of the two banking systems which are Islamic and conventional banks in Malaysia, equality of mean test is done. The assumption used here is that the performance ratios calculated are normally distributed. The null hypothesis of the equality of mean of the conventional banks and Islamic banks is tested against not-equality of mean. Student’s t-test is then used to assess the statistical difference between the two types of the banks.Based on the results, it shows that the gap between the two different systems of banks are certainly closer now and it’s a big development for Islamic banks since they started in 1983.This results may not be that surprising considering various initiatives and effort taken by government to improve Islamic banking over the years.

TABLE OF CONTENTS
PAGE DECLARATION OF ORIGINALITY& WORD COUNT 3 ABSTRACT 4 TABLE OF CONTENTS 5-7

LIST OF FIGURES 8 LIST OF TABLES 9
CHAPTER 1: INTRODUCTION 10
1.1INTRODUCTION TO BANKING SYSTEM IN MALAYSIA 10-11
1.2DEVELOPMENT OF ISLAMIC BANKING IN MALAYSIA 11-13
1.3 RESEARCH OBJECTIVES 13-14 1.4 ORGANIZATION OF PAPER 14

CHAPTER 2: LITERATURE REVIEW 15 2.1 SIMILAR STUDIES RELATING TO PERFORMANCE 15-18 COMPARISON OF BOTH BANKING SYSTEMS IN MALAYSIA

2.2 SIMILAR STUDIES RELATING TO PERFORMANCE 18-24 COMPARISON OF BOTH BANKING SYSTEMS
OVERSEAS
2.3 BASIC PRINCIPLES OF ISLAMIC BANKING 24

CHAPTER 3:RESEARCH METHODOLOGY 25 3.1 INTRODUCTION 25 3.2 DATA COLLECTION...
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