Thus in Islamic Banking, the creditor should not take advantage of the borrower. This principle is applicable to both labour and capital. After all, maximum gains and profits would be the main target of the bank at the end of the day and a dealer in alcohol would assure them that.
For this purpose, we will refer to the banking literature to find most commonly used ratios. It can charge additional money penalty and compounded interest in case of defaulters.
The Islamic banks, on the other hand, give greater emphasis on the viability of the projects. This paper work is going to perform comparative analysis of Islamic Banking and Conventional Banking firms. The conventional banks give greater emphasis on credit-worthiness of the clients. Islamic bank can only guarantee deposits for deposit account, which is based on the principle of al-wadiah, thus the depositors are guaranteed repayment of their funds, however if the account is based on the mudarabah concept, client have to share risk in a loss position.
Interest is considered to be the price of credit, reflecting the opportunity cost of money. The fourth and foremost difference that underlies these two banking systems is the concept of interest or Riba Usury.
Consequently, results from empirical analysis indicate that there is difference in profitability determinants. Islamic law considers a loan to be given or taken, free of charge, to meet any contingency. We plan to measure performance in terms of capital adequacy, asset quality, management, earnings and liquidity.
The status of Islamic bank in relation to its clients is that of partners, investors and trader, buyer and seller. In this work, t-test, f-test, and regression analysis will be used to make hypothesis test and determine the ratio significance.
Results show differences in regards to factors affecting performance between Conventional and Islamic banks. This study will also touch the differences of the Islamic Banks and Conventional Banks in terms of historical origin, mobilizing of financial resources, and ways of generating profit, operating principles, and equity structure.
A conventional bank has to guarantee all its deposits from risk. Since Conventional banks are driven by maximum profit motive, such services remain absent from their system.
While interest might play a leading role in the Conventional baking system all over the world, Islamic Shariah has allowed absolutely no room for such concepts; in fact, they prohibit dealings in interest at all costs.
The Islamic banks have no provision to charge any extra money from the defaulters. On the contrary, Islamic banks would place certain checks and balances to ensure that money lent is used in an appropriate manner so that the borrower does not make unlawful gains.
The main focus of this comparative study is to evaluate and measure the difference in financial performance of the two dissimilar banking firms operating in different countries.
Using a sample of 71 Conventional banks and 46 Islamic banks that operate inside GCC countries for the period and by using CAMEL test, we find that comparing the profitability of the Islamic and Conventional banks shows that for all the ratios used to measure profitability, Islamic banks are on-average more profitable than the Conventional ones.
For Islamic banks, inflation has a positive and significant coefficient. Operation cost has a positive and significant effect on performance in Conventional and Islamic banks.
Master of Science in Banking and Finance. Conventional banking is essentially based on the debtor-creditor relationship between the depositors and the bank on one hand, and between the borrowers and the bank on the other. To evaluate empirically performance of the banks, different financial ratios are going to be employed which are based on CAMEL framework.
Since it shares profit and loss, the Islamic banks pay greater attention to developing project appraisal and evaluations. The investor is assured of a predetermined rate of interest.
As no payment is allowed for labour, unless it is applied to work, there is no reward for capital unless it is exposed to business risk. In the modern Islamic banking system, it has become one of the service-oriented.
It also aims at maximizing profit but subject to Shariah restrictions. Only small amount of compensation and these proceeds is given to charity. The coefficient of credit risk is negative and significant in Conventional banks and positive but non significant in Islamic banks.
In essence, social consideration remains a major target in Islamic banking whereas social injustices are common in Conventional Banking. Some features of this site may not work without it. Since income from the advances is fixed, it gives little importance to developing expertise in project appraisal and evaluations.
Specifically, credit risk does not affect Islamic bank performance, while inflation and DGP growth do not affect the performance of Conventional banks.
It does not deal with Zakat.A comparative study on the financial performance between Islamic and conventional banks: Egypt case Islamic banking, conventional banking, banks financial performance measures, profitability, Egypt. Abstract There is no doubt that banks have significant position in the welfare of any economy.
The research main aim is to. The paper shows that Islamic Banking is falling behind the conventional one both in terms of its business as well as customer perspective. The research is divided into three parts.
First part covers the comparison of financial analysis between Islamic and conventional banks in Pakistan over last five years.
A Comparative Study of Financial Performance between Conventional and Islamic Banking in United Arab Emirates Mukdad Ibrahim* Department of Accounting and Finance, American University of Ras Al Khaimah, United Arab Emirates, P O BoxRas Al Khaimah.
Keywords: Banking, Financial Analysis, Performance. in Saudi Arabia in comparison to the conventional banking.
For this purpose, a comparative analysis between conventional and Islamic banks is undertaken by this study. Highlights of Saudi Banking System Progress of Islamic banking in the world is exceptional. As. A Comparative Study between the Islamic and Conventional Banking Systems and Its Implications 1.
Risk-Weighted Assets For banking institutions with conventional and Islamic EMPIRICAL ANALYSIS banking operations, the RWCR is computed in the following manner: Risk Indicators for the Banking Sector Capital BaseConventional.
Comparative analysis of Conventional and Islamic Banks of Bangladesh A thesis report that measures and compares the performance of conventional and Islamic banks of Bangladesh for the year Submitted by Tanjid Ahmed Shovon ID: 17th batch Department of Accounting & Information Systems University of Dhaka A .Download