COMPARISON OF PERFORMANCE FACTORS OF ISLAMIC AND CONVENTIONAL BANKING

Abstract

Purpose: The main focus regarding this Research is to get the accurate results regarding performance of conventional banking channel as compare to Islamic banking channel. In Pakistan, Islamic banks covered a great market share that’s why this topic is chosen to identify the differences between both banks. Methodology & Design: In this study, we considered six different banks in which three Conventional banks are compared with 3 most famous Islamic banks. Three Conventional banks are Bank AL-Habib, Faysal Bank and Soneri Bank Limited Whereas Islamic Banks are Meezan Bank, Bank Islami and Al-Baraka Bank. In Pakistan there are four Islamic Banks working in which we select three of them and Conventional Banks are selected as considering the size ofselected Islamic banks. We consider here 12 years of data from 2007 to 2018 and performance will be measured on the basis of four different variables. The variables are Net Income, Earning per Share, Return on Equity and Return on Asset. Four null hypothesis are developed in this study which are based on four defined variables. In this thesis/study, initially the Descriptive Analysis performed in which Standard Deviation and Mean consider as important factor for the profitability evaluation. Secondly, we performed the hypothesis testing in which we declared the results on the basis ofp-value. are Findings: In Descriptive Analysis, we get the results regarding performance and Profitability of banking sector which shows that Conventional banks are performing much greater as compare to Islamic banking sector. In Descriptive analysis the differences are measured on the basis of Mean and standard Deviation. It is highlighted that conventional banks are proved to be higher profitable than Islamic banks which are based on Net Income, EPS, ROA and ROE. In Hypothesis testing we develop four Hypothesis and perform t-test for the rejection and acceptance of hypothesis. When we performed t-test on four different variables and we get the results that p-value of all variables fall below from 0.05 that’s why we reject all four null hypothesis. It indicates that the significance difference highlighted or found among the performance regarding conventional banks and Islamic banks.