Comparative Financial Analysis of Conventional and Islamic Banks of Developing Countries

Authors

  • Md. Abdul Halim Department of Business Administration, Mawlana Bhashani Science and Technology University, Bangladesh
  • Md. Nazmul Islam Department of Business Administration, Mawlana Bhashani Science and Technology University, Bangladesh
  • Abdul Gaffar Khan Department of Business Administration, Mawlana Bhashani Science and Technology University, Bangladesh

DOI:

https://doi.org/10.30564/jbar.v3i4.2446

Abstract

This study investigated the financial performance of Bangladesh’s StateOwned Commercial Banks, Islami Shariah Based Private commercial Banks and Conventional Private Commercial Banks over 12 years from 2006 to 2017. The objective of this study is to find out the financial performance of a bank based on CAMEL indicators. The finding of this study is that Islami Shariah Based Private commercial Banks and Conventional Private Commercial Banks has a good position than StateOwned Commercial Banks. Specific, Pubali Bank Limited, Standard Bank Limited, Prime Bank Limited, City Bank Limited and Al-Arafah Islami Bank Limited are in the best position in Bangladesh under this study. We also found that the performance of State-Owned Commercial Banks is not good. This study gives a policy implementation according to results. 1. State-Owned Commercial Banks should restructure the infrastructure. 2. It needs more emphasis on efficiency and effectiveness to control the cost and loan investment. 3. It will be required to pay more in insurance premiums. 4. It should be born in mine, for higher rating banks. We suggest to a higher number of rating banks that it’s hinders a bank’s ability to expand by investing, consolidating, or adding more branches. We also suggest to all lower rating banks. The institutions with a poor rating will be required to pay more in insurance premiums.

Keywords:

Capital Adequacy, Asset Quality, Management Quality, Earnings Ability, Liquidity, Bank, Financial Performance

References

[1] Adam, M. H. M. Evaluating The Financial Performance Of Banks Using Financial Ratios-A case Study Of Erbil Bank For Investment And Finance. European Journal of Accounting Auditing and Finance Research, 2014, 2(6):162-177.

[2] Ahsan, M. K. Measuring financial performance based on CAMEL: A study on selected Islamic banks in Bangladesh. Asian Business Review, 2016, 6(1): 7-56.

[3] Ailemen, I. O., Ojeka, S. Corporate Governance as a tool for Curbing Bank distress in Nigeria Deposit Money Banks: Empirical Evidence. Research Journa of Finance and Accounting, 2013, 4(13): 41-51.

[4] Ariff, M. Islamic banking: Asian-Pacific Economic Literature, 1988, 2(2): 48-64.

[5] Asad, M., Ahmad, I., Haider, S. H., Salman, R. A Critical Review of Islamic and Conventional Banking in Digital Era: A Case of Pakistan. International Journal of Engineering & Technology, 2018, 7(4): 57-59.

[6] Berger, A. N., Boubakri, N., Guedhami, O., Li, X. Liquidity creation performance and financial stability consequences of Islamic banking: Evidence from a multinational study. Journal of Financial Stability, 2019, 44. https://doi.org/10.1016/j.jfs.2019.100692

[7] Bourkhis, K., Nabi, M. S. Islamic and conventional banks’ soundness during the 2007-2008 financial crisis. Review of Financial Economics, 2013, 22(2): 68- 77.

[8] Chol, B. B., Nthambi, E. K., Kamau, J. N. Ownership structure, bank stability, and the financial performance of commercial banks in South Sudan. International Journal of Research in Business and Social Science, 2019, 8(6): 31-39.

[9] Čihák, M., & Hesse, H. Islamic banks and financial stability: An empirical analysis. Journal of Financial Services Research, 2010, 38(2-3): 95-113.

[10] Gugong, B. K., Bala, H. Equity Formation And Financial Performance of Listed Deposit Money Banks in Nigeria. European Journal of Accounting Auditing and Finance Research, 2015, 3(8): 25-39.

[11] Jalbani, A. A., Shaikh, S. A. A. Risk management in Islamic and conventional banks: A differential analysis. Journal of independent studies and research, 2009, 7(2): 67-70.

[12] Kargi, H. S. Credit risk and the performance of Nigerian banks. Ahmadu Bello University, Zaria, 2011.

[13] Kaur, J., Kaur, M., Singh, S. Financial performance analysis of selected public sector banks: A CAMEL model approach. International Journal of Applied Business and Economic Research, 2015, 13(6): 4327- 4348.

[14] Khan, A. Bank Management: A Fund Emphasis. Ruby, 2008.

[15] Kumar, M. A., Harsha, G. S., Anand, S., Dhruva, N. R. Analyzing soundness in Indian banking: A CAMEL approach. Research Journal of Management Sciences, 2012, 1(3): 9-14.

[16] Latif, Y., Abbas, A., Akram, M., Manzoor, S., Ahmad, S. Study of performance comparison between Islamic and conventional banking in Pakistan. European Journal of Educational and developmental psychology, 2016, 4(1): 17-33.

[17] Merchant, I. P. An empirical study of Islamic banks versus conventional banks of GCC. Global Journal of Management and Business Research, 2012, 12(20): 33-41.

[18] Pappas, V., Ongena, S., Izzeldin, M., Fuertes, A.- M. A survival analysis of Islamic and conventional banks. Journal of Financial Services Research, 2017,51(2): 221-256.

[19] Roman, A., Şargu, A. C. Analyzing the financial soundness of the commercial banks in Romania: an approach based on camel’s framework. Procedia Economics and Finance, 2013, 6: 703-712.

[20] Subayyal, M., Usman, M., Aziz, F. Comparative analysis of Islamic & Conventional banks: risk & return perspective: Faculty member at Majan College University College, Muscat Oman, 2016.

[21] Tarawneh, M. A comparison of financial performance in the banking sector: Some evidence from Omani commercial banks. International Research Journal of Finance and Economics, 2006, 3(3): 101-112.

[22] Ujuju, L., Etale, L. Macroeconomic analysis of the relationship between interest rate, economic growth, and bank lending in Nigeria. European Journal of Business and Innovation Research, 2016, 4(3): 29- 37.

[23] Velnampy, T., Anojan, V. Financial performance of state and private sector commercial banks: A comparative study during war and post war scenarios of Sri Lanka. European Journal of Business and Innovation Research, 2014, 2(1): 93-105.

Downloads

Issue

Vol. 3 , Iss. 4 (October 2020)

Article Type

Articles

License

Copyright and Licensing

The authors shall retain the copyright of their work but allow the Publisher to publish, copy, distribute, and convey the work.

Journal of Business Administration Research publishes accepted manuscripts under Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0). Authors who submit their papers for publication by Journal of Business Administration Research agree to have the CC BY-NC 4.0 license applied to their work, and that anyone is allowed to reuse the article or part of it free of charge for non-commercial use. As long as you follow the license terms and original source is properly cited, anyone may copy, redistribute the material in any medium or format, remix, transform, and build upon the material.

License Policy for Reuse of Third-Party Materials

If a manuscript submitted to the journal contains the materials which are held in copyright by a third-party, authors are responsible for obtaining permissions from the copyright holder to reuse or republish any previously published figures, illustrations, charts, tables, photographs, and text excerpts, etc. When submitting a manuscript, official written proof of permission must be provided and clearly stated in the cover letter.
The editorial office of the journal has the right to reject/retract articles that reuse third-party materials without permission.

Journal Policies on Data Sharing

We encourage authors to share articles published in our journal to other data platforms, but only if it is noted that it has been published in this journal.