Abstract:
Purpose
The main purpose ofthis study is to examine the differences between conventional banks and
Islamic banks operating in Pakistan. The differences are measured on profitability,
efficiency, and assets quality and liquidity measures.
Methodology & Design
The study uses 11 different ratios under the variable of profitability, efficiency, assets quality
and liquidity. The sample of six banks, which includes three conventional and three Islamic
banks operating in Pakistan. The sample size range from 2016 to 2018 (three years) with
annual frequency. The study uses two stage analysis, in first stage descriptive statistics are
estimated to identify difference in variables and t-test analysis are performed to check
significance ofthe differences.
Findings
The descriptive statistics summarized that conventional banks are more profitable and have
better asset quality than that of Islamic banks. While on the efficiency front, conventional
banks are more efficient in terms of OpexRev and OpexAst ratios whereas, Islamic banks are
more efficient on LDR and NIM metric. On the other hand, liquidity variables state that
Islamic banks are more than conventional banks. These differences were further measured
with independent t-test for significance of differences, which confirms that the differences
between profitability, asset quality and liquidity of conventional banks with Islamic banks
statistically significant. However, differences between efficiency of conventional
banks with Islamic banks are statistically significant.
are not
Limitations
of limited in terms of breath and width. More banks should be added which The sample size
spread over multiple periods with quarterly results The study should incorporate macroeconomic indicators to identify the indicators which
influence the profitability, efficiency, quality and liquidity of conventional and Islamic
banks.
