Comparison of Islamic Banks with Conventional Banks: Evidence from an Emerging Market

Abstract

This paper evaluates and compares the performance of Sharia-compliant banks with their conventional counterparts operating in Pakistan. Data of five completely Islamic Banks(IBs) and fifteen Conventional Banks (CBs), from Pakistan, have been used for the study. Study period comprises of six years from year 2008 to year 2013. Bank's orientation, efficiency, quality of assets and stability are the measures used to compare the performance of Shariah-compliant and conventional banks. The Islamic Banks in Pakistan are younger in age and smaller in size compared to the Conventional Banks. Based on the financial ratios of two types of banks, we find that the business model of Islamic Banks is inferior to the model of Conventional Banks. Islamic Banks are less cost efficient than Conventional Banks. However, Islamic Banks have superior asset quality with better bank stability position.

Exploring asymmetric relationship between Islamic banking development and economic growth in Pakistan: Fresh evidence from a non‐linear ARDL approach

“…Currently, the assets of IBs are about 14% of all the banking assets in the country (Mirza, Rahat, & Reddy, 2015). Shaikh, Sharif, and Arif (2016) confirmed Pakistani IBs outperformed CBs in terms of stability. Interestingly during the global financial crisis and weak economic conditions in Pakistan, the IBs have witnessed remarkable progress in the shape of increased deposits, reserves and expansion of business volume in the country.…”

Co-integration of Sukuk and Bond Yields - Evidence from Globally Placed Sukuk

“…After all acceptance of Islamic products by the international finance markets is not a proof of its legitimacy, since, as Al-Amine (2008); Shaikh, Sharif, and Arif (2016) point out, the focus of the Islamic capital market shall not be only on how to raise the funds and be acceptable to international financial institutions but to be sharia-compliant first and foremost. El-Gamal (2003) finds it paradoxical that "Islamic finance quickly turned to mimicking the (interest-based) conventional finance it set out to replace."…”

Efficiency Analysis of Mud. arabah ¯ and Leasing Firms in Pakistan

“…Although, there are studies in Pakistan that have compared the efficiency of Islamic banks with conventional banks (Aman et al, 2016) and there are also studies on comparison of the efficiency of Islamic takāful companies with conventional insurance companies (Asghar et al, 2019) However, to the best of author's knowledge there is a single significant study which has examined the efficiency of both mud .ā rabah and leasing companies. analyzed the level of efficiency of both mud .ā rabah firms and leasing firms with the help of the SFA technique throughout for 2005 to 2010.…”

“…Taking the pieces of evidence from the previous literature related to determinants of FIs' efficiency, this study selected four inputs variables; Operating expenses (Masood & Ashraf, 2012;Moussa, 2015;Siraj & Pillai, 2012;Tarus et al, 2012), liabilities (Plantin, 2015;Valverde & Fernandez, 2007), fixed assets (Anbar & Alper, 2011;Berger et al, 2017;Ryan et al, 2014;Yudistira, 2004) and equity (Groff & Morec, 2020;Mondal & Ghosh, 2012;Samad, 2004), and two outputs variables; income (Brar & Singh, 2016;Siraj & Pillai, 2012) and investments (Ashraf et al, 2016;Zaher & Kabir, 2001) to analyses and compare the efficiency of mud .ā rabah and leasing firms.…”