scholarly journals Do Islamic Banks Perform Better than Conventional Banks?

10.26414/a082 ◽  
2021 ◽  
Vol 8 (1) ◽  
pp. 1-17
Author(s):  
Asif Ali ◽  
Malik Fahim Bashir ◽  
Muhammad Asim Afridi
Keyword(s):  
Logistic Regression ◽  
Quality Management ◽  
Banking Sector ◽  
Performance Comparison ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Composite Rating ◽  
Conventional Banks ◽  
Asset Quality ◽  
Better Than

This study aims to compare the performance of Islamic and conventional banks in Pakistan for the period 2007-2016. For the purpose, the study first employs CAMELS composite rating to find the ratios to highlight the managerial and financial performance of the banks. The study then uses logistic regression technique for the performance comparison of Islamic and Conventional banks. The composite rating results reveal that both Islamic and conventional banks fall in rank 3 and need help from regulatory authorities to improve the performance of banking sector in Pakistan. Furthermore, the logistic regression results reveal that Islamic banks perform well in asset quality, management adequacy and sensitivity to market risk whereas conventional banks are efficient in capital adequacy and liquidity. Robustness of results is achieved by performance comparison of the same size Islamic and conventional banks. This analysis is important because Pakistan’s banking sector is hybrid where both Islamic and conventional banks work in the same environment and under the same regulator. Findings of this study are not only useful for Islamic and conventional banks operating in Pakistan but would also help the policymakers in devising future policies.

scholarly journals Evaluation and Comparison of Financial Soundness of Islamic and Conventional Private Commercial Banks in Bangladesh: A CAMEL Approach

2020 ◽  
pp. 128-140
Keyword(s):  
Quality Management ◽  
Stock Exchange ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Management Quality ◽  
Significant Difference ◽  
Financial Soundness ◽  
Marginal Status ◽  
Conventional Banks ◽  
Asset Quality

This article evaluates and compares the financial soundness of Islamic and conventional PCBs operating in Bangladesh based on the CAMEL approach over the period 2015 to 2019. For this purpose, the authors select a sample of 17 Conventional PCBs and 6 Islamic PCBs listed on the Dhaka Stock Exchange. In terms of composite CAMEL ratings, none of the banks is found to be strong or satisfactory in financial soundness in 2019. Out of 17 conventional banks, 13 of them are in a fair position i.e. having financial, operational, or compliance weakness and need more than normal supervision and regulation to address the deficiencies. Another 4 conventional banks are in a marginal position means that they are in serious financial problems and need close supervision and regulation. Ranking of conventional banks based on composite CAMEL ratings shows that Brac Bank Ltd. is in top position (Score 2.65) with Bank Asia Ltd. securing second position (score 2.7) while AB Bank Ltd., IFIC Bank Ltd, One Bank Ltd., and Mutual Trust Bank Ltd. are in the worst position with marginal status. Among 6 Islamic banks, 5 are in a fair position and only 1 in a marginal position in 2019. Shahjalal Islami Bank Ltd. secures the top position (Score 2.8) with fair status and Social Islami Bank Ltd. is in the worst position with marginal status. Independent sample test is used to see whether there is any significant difference between Islamic and Conventional PCBs concerning CAMEL parameters. The study finds that except for liquidity there is no significant difference in capital adequacy, asset quality, management quality, and earnings quality. The study also reveals that there is no significant difference in the average CAMEL ratings of two types of Banking. However, on average Islamic banks have better asset quality, management quality while conventional banks have better capital adequacy, earnings, and liquidity.

The Use Of CAMELS In Detecting Financial Distress Of Islamic Banks In Malaysia

2014 ◽  
Vol 30 (2) ◽  
pp. 445 ◽  
Author(s):  
Rashidah Abdul Rahman ◽  
Mazni Yanti Masngut
Keyword(s):  
Neural Network ◽  
Quality Management ◽  
Financial Distress ◽  
Capital Adequacy ◽  
Advisory Council ◽  
Annual Reports ◽  
Islamic Banks ◽  
Return On Assets ◽  
Management Quality ◽  
Asset Quality

The current study uses CAMEL (Capital Adequacy, Asset Quality, Management Quality, Earnings Efficiency, and Liquidity) ratings system, with the addition of Shariah Compliance Ratio (CAMELS) in order to detect the financial distress of Islamic banks in Malaysia. Using neural network, the study analyses data collected from the 17 Islamic banks annual reports for the period 2006 to 2010. It was found that all Islamic banks have higher ETA ratios which portray a good performance of capital adequacy and are less likely to face financial distress. As for asset quality, all Islamic banks did not have the possibility to face financial distress as they are able to handle their non-performing loans throughout the years. Meanwhile for management quality, all Islamic banks show lower ratios in paying salaries to their employee. Earning efficiency for all Islamic banks show better performance and will be less likely to face financial distress in terms of return on assets but not for return of equity. Liquidity indicates that the Islamic banks have a large number of loans but they have sufficient liquid assets in order to cover their liabilities and commitments. Lastly for Shariah Compliance, Islamic banks have complied with all rules and regulations that have been regulated by Bank Negara Malaysias Shariah Advisory Council.

Linkage between corporate governance and corporate social responsibility in banking sector of Bangladesh

2015 ◽  
Vol 02 (04) ◽  
pp. 1550036 ◽  
Author(s):  
Syed Moudud-Ul-Huq
Keyword(s):  
Corporate Governance ◽  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Banking Sector ◽  
Islamic Banks ◽  
Return On Equity ◽  
Earnings Per Share ◽  
Conventional Banks ◽  
Corporate Social ◽  
Better Than

This paper has been made to analyze the linkage between corporate governance and corporate social responsibility. From analysis, it is found that Eastern Bank Ltd. (EBL) performs better than other selected banks but not enough in practicing corporate social responsibility. While, conventional banks are more imperative than Islamic banks as all the indicators cover its benchmark apart from return on total assets. It has proved that there is a significant relationship among return on equity, earnings per share, corporate governance and corporate social responsibility but corporate social responsibility has shown little impact on corporate performance.

scholarly journals PERFORMANCE COMPARISON BETWEEN ISLAMIC BANKS AND CONVENTIONAL BANKS IN INDONESIA

2018 ◽  
Vol 18 (1) ◽  
Author(s):  
Dudi Rudianto ◽  
Tetty Sari Rahmiati
Keyword(s):  
Performance Comparison ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Capital Adequacy Ratio ◽  
Conventional Banks

Penelitian ini bertujuan untuk mengetahui pengaruh makroekonomi yang diukur oleh inflasi, net ekspor dan suku bunga Bank Indonesia (BI rate)  terhadap kinerja perbankan serta melakukan analisis perbandingan kinerja perbankan yang diukur oleh capital adequacy ratio (CAR), loan to deposit ratio (LDR) dan non performing loan (NPL) antara bank umum syariah (BUS) dengan bank umum konvensional (BUK). Penelitian ini dilakukan dengan menggunakan sampel pada  tiga BUS dan tiga BUK yang memiliki nilai asset yang setara untuk diperbandingan dengan menggunakan data bulanan dari tahun 2005 sampai dengan tahun 2012.  Dari penelitian yang dilakukan diperoleh hasil bahwa, secara simultan faktor-faktor makro ekonomi yang terdiri dari inflasi, net ekspor dan BI rate memiliki pengaruh yang signifikan terhadap kinerja perbankan yang diukur oleh CAR baik pada BUS maupun pada BUK, dengan besaran pengaruh yang lebih besar pada BUS dibandingkan pada BUK. Namun secara parsial hanya BI rate yang memiliki pengaruh yang signifikan terhadap CAR dari kedua jenis perbankan tersebut. Kinerja BUS yang diukur oleh CAR, LDR, dan NPL memiliki perbedaan yang signifikan dengan BUK dan secara menyeluruh kinerja perbankan BUS lebih baik dibandingan BUK.

scholarly journals PERBANDINGAN TINGKAT PROFITABILITAS DAN LIKUIDITAS DARI ASSET-LIABILITIES MANAGEMENT PADA BANK SYARIAH DAN BANK KONVENSIONAL

2016 ◽  
Vol 5 (1) ◽  
pp. 1
Author(s):  
Rindang Nuri Isnaini Nugrohowati
Keyword(s):  
Banking Sector ◽  
Banking System ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Return On Assets ◽  
Return On Equity ◽  
Liability Management ◽  
Capital Adequacy Ratio ◽  
Conventional Banks ◽  
Important Position

Abstract The banking sector has a very important position for the economic systemof a country. The banking system, which is part of the financial system willaffect the course of the economic system as a whole. If the banking system isweak then the system will also be weak economy. Banking is an intermediaryinstitution is the institution that channel funds from surplus funds (surplusunits) to the sectors that lack of funds (defi cit units). With the banking economic actors in need of funds can be met so that the economy can continue to run. In this study will specifi cally analyze the comparison of the level of profi tability of the asset-liability management in Islamic banks and conventional banks are seen from the return on assets and return on equity rises. It also will be studied comparative level of liquidity in Islamic banks and conventional banks are seen from the loan to deposit ratio and Capital Adequacy Ratio. By Hyphothesis is as follows : Ha1: there are differences in the level of profitability of the asset-liabilitymanagement in Islamic banks and conventional banks are seen from the return on assets and return on equity Ha2: there are differences in the level of liquidity in Islamic banks andconventional banks are seen from the loan to deposit ratio and Capital Adequacy Ratio Data analysis has been done obtained the following conclusions, based onmeans testing compare with test Independent-Samples t-test showed that the level of tability seen from ROA and ROE between Islamic Bank and Bank Konvensiona show any signifi cant difference. This is demonstrated by tests of signifi cance 0.02 0.05 for FDR, while for the signifi cance test CAR of 0.38> 0.05. Keyword: Profi tabilitas, Likuiditas, Asset Liabilities Management, Bank Syariah

scholarly journals Perbandingan Kinerja Bank Syariah dan Bank Non Syariah

1970 ◽  
Vol 3 (01) ◽  
pp. 52-59
Author(s):  
Amelia Oktrivina Diapari Siregar
Keyword(s):  
Stock Exchange ◽  
Financial Statements ◽  
Jel Classification ◽  
Performance Comparison ◽  
Research Data ◽  
Islamic Banks ◽  
Research Results ◽  
Significant Difference ◽  
Conventional Banks ◽  
Better Than

A B S T R A C T The purpose of this study was to determine and measure the performance comparison between Islamic banks with conventional banks are seen by CAR, ROA, LDR, NPL, and ROA. The research data was obtained from the financial statements listed in Indonesia Stock Exchange in 2012 - 2013. The results showed that there are significant differences between Islamic banks with conventional banks if measured by ROA, LDR, NPL, and BOPO while the CAR no significant difference between islamic banks with conventional banks. Based on research results Islamic banks overall average of the ratio used shows that the CAR, LDR, NPL, and BOPO greater than conventional banks. While conventional banks have an average ROA, and BOPO higher than islamic banks while the average CAR, LDR, and NPL better than islamic banks means that the good performance of the conventional banks because even though banks have low capital and low lending to customers this has resulted in low non performing loans in the bank so that the bank has a high income. A B S T R A K Tujuan penelitian ini adalah untuk mengetahui perbandingan kinerja bank syariah dengan bank konvensional dilihat berdasarkan rasio CAR, ROA, LDR, NPL, dan BOPO. Data penelitian ini diperoleh dari laporan keuangan yang terdaftar di Bursa Efek Indonesia tahun 2012-2013. Hasil penelitian menunjukkan bahwa terdapat perbedaan yang signifikan antara bank syariah dengan bank konvensional jika diukur dengan rasio ROA, LDR, NPL, dan BOPO sedangkan rasio CAR tidak terdapat perbedaan yang signifikan antara bank syariah dengan bank konvensional. Berdasarkan hasil penelitian bank syariah mempunyai rata – rata secara keseluruhan dari rasio yang digunakan menunjukkan bahwa rasio CAR, LDR, NPL, dan BOPO lebih besar dibandingkan dengan bank konvensional. Sedangkan bank konvensional mempunyai rata – rata rasio ROA, dan BOPO lebih tinggi dibandingkan bank syariah sedangkan rata – rata rasio CAR, LDR, dan NPL lebih rendah dibandingkan bank syariah, artinya bahwa kinerja bank konvensional bagus karena meskipun bank memiliki modal yang rendah dan rendahnya pemberian kredit kepada nasabah hal ini yang mengakibatkan rendahnya kredit bermasalah pada bank sehingga bank mempunyai pendapatan yang tinggi. JEL Classification: G14, G10

scholarly journals Performance Of The South African Banking Sector Since 1994

2014 ◽  
Vol 30 (4) ◽  
pp. 1183 ◽  
Author(s):  
Christopher Ifeacho ◽  
Harold Ngalawa
Keyword(s):  
Quality Management ◽  
Interest Rates ◽  
South African ◽  
Banking Sector ◽  
Capital Adequacy ◽  
Bank Performance ◽  
The South ◽  
Macroeconomic Variables ◽  
Asset Quality ◽  
The Impact

This study investigates the impact of bank-specific variables and selected macroeconomic variables on the South African banking sector for the period 1994-2011 using the capital adequacy, asset quality, management, earnings, and liquidity (CAMEL) model of bank performance evaluation. The study employs data in annual frequency from South Africas four largest banks, namely, ABSA, First National Bank, Nedbank, and Standard Bank. These banks account for over 70% of South Africas banking assets. Using return on assets (ROA) and return on equity (ROE) as measures of bank performance, the study finds that all bank-specific variables are statistically significant determinants of bank performance. Specifically, the study shows that asset quality, management quality, and liquidity have a positive effect on both measures of bank performance, which is consistent with a priori theoretical expectations. Capital adequacy, however, exhibits a surprising significant negative relationship with ROA, while its relationship with ROE is significant and positive as expected. Except for interest rates (in the ROA model), unemployment rate (in the ROA model), and the rate of inflation (in the ROE model), the rest of the macroeconomic variables are statistically insignificant. The study reveals that bank performance is positively related to interest rates and negatively related to unemployment rates and interest rates.

scholarly journals Capital Regulation and Risk-taking Behavior: Empirical Evidence for Islamic Banks

2022 ◽  
Vol 12 (1) ◽  
pp. 43-50
Author(s):  
Yomna Daoud ◽  
Aida Kammoun
Keyword(s):  
Empirical Evidence ◽  
Risk Taking ◽  
Banking Sector ◽  
Theoretical Background ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Capital Regulation ◽  
Islamic Banks ◽  
Conventional Banks ◽  
The Relationship

This paper investigates whether regulatory pressures have an impact on the relationship between change in capital and bank risk-taking. On the basis of a well developed theoretical background, capital regulation constitutes the core of prudential regulation within the banking sector. Several researches have investigated this relationship between capital and risk in conventional banks, and this subject has gained in interest since the last financial crisis. This study is one of the few studies that have attempted to provide empirical evidence on this issue for Islamic banks. We use data of Islamic banking sectors over the period 2010–2014. The results reveal that Islamic banks tend to behave differently at each level of capital adequacy. In addition, we provide some evidence that change in capital is positively related to the change in risk for highly capitalized Islamic banks.

scholarly journals Financial Performance Comparison of Islamic and conventional banks in the United Arab Emirates (UAE)

2017 ◽  
Vol 1 (1) ◽  
pp. 477-494 ◽  
Author(s):  
Mosab I Tabash ◽  
Ali T Yahya ◽  
Asif Akhtar
Keyword(s):  
Financial Performance ◽  
United Arab Emirates ◽  
Financial Risk ◽  
Descriptive Analysis ◽  
Performance Comparison ◽  
Capital Adequacy ◽  
Operating Efficiency ◽  
Islamic Banks ◽  
Significant Difference ◽  
Conventional Banks

This paper examines the financial performance of Islamic and commercial banks in the United Arab Emirates (UAE). The paper gives an empirical insights and comparisons between the performance of Islamic and conventional banking sectors.  The sample of the study consists of 5 fully-fledged Islamic banks and 14 conventional banks working in the UAE under the period 2011-2014. The study uses descriptive analysis, correlation, independent sample t test and multiple regression analysis to assess the performance and to compare between both types of banks. The Return on Assets (ROA) is used as proxy for profitability for both types of banks while bank size (log A), liquidity, capital adequacy, financial risk and operating efficiency as proxies for financial performance for both types of banks. The results showed that there is no significant difference between Islamic banks and conventional banks in terms of profitability (ROA) while there is a significant difference between Islamic and conventional banks in terms of liquidity, operation efficiency, capital adequacy, and financial risk. Further, the results indicated that the Islamic banks have higher operating efficiency, bank size and more liquidity than their counterparts of UAE. However, conventional banks are found to have better capital adequacy ratio than Islamic banks. In terms of financial risk, Islamic banks are found to have higher five times than conventional banks which may reflect challenges in the area of risk management in Islamic banks. Keywords: Financial performance, Islamic banks, Conventional banks, ROA, UAE. JEL Classification: A10, E60, G21

Performance comparison of Islamic (participation) banks and commercial banks in Turkish banking sector

2014 ◽  
Vol 9 (2) ◽  
pp. 114-128 ◽  
Author(s):  
Cengiz Erol ◽  
Hasan F. Baklaci ◽  
Berna Aydoğan ◽  
Gökçe Tunç
Keyword(s):  
Asset Management ◽  
Banking Sector ◽  
Banking System ◽  
Performance Comparison ◽  
Islamic Banks ◽  
Comparative Performance ◽  
Data Set ◽  
Content Type ◽  
Logistic Regression Method ◽  
Conventional Banks

Purpose – The purpose of this paper is to attempt to compare the performance of Islamic banks against conventional banks in Turkey. This comparison is much more distinctive and significant in Turkey when compared to other countries, as Turkey stands as a model for the world in interest-free banking system. Design/methodology/approach – The comparative performance analysis was conducted by means of logistic regression method during the period of 2001-2009. The CAMELS approach is utilized to assess the managerial and financial performance of banks. Findings – The results signify that Islamic banks operating in Turkey perform better in profitability and asset management ratios compared to conventional banks but lag in sensitivity to market risk criterion. These findings might mainly be ascribed to the fact that these banks allow lower provisional losses compared to conventional banks and have some tax advantages. Research limitations/implications – Utilizing a more recent and consistent data set, the analyses could be replicated to determine if the results are subject to any sample bias. Practical implications – These finding reveal significant implications for potential entrants into Turkish banking sector particularly for foreign investors. Social implications – The findings from this study may reinforce the awareness and confidence in participating banks in Turkey. Originality/value – Turkey is particularly interesting to conduct this analysis because Turkey is a Muslim but secular country and both Islamic and conventional banks are subject to same set of banking regulations which are based on Western traditional banking system. Furthermore, to the knowledge, there is not a comprehensive study that compares the performance of conventional and Islamic banks in a Western banking system.

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