Comparative Analysis of Islamic Banks and Conventional Banks Performance based on Interest Rate.”

Abstract

The prime aim for conducting this study has been to compare the impact of KIBOR on performance of conventional & Islamic banks. This study has been considered four Islamic banks and four conventional banks to make the comparative analysis. Whereas, time period selected for comparative analysis has been from 2007 to 2018, as data regarding variables has been collected from annual financial statements and official website of State Bank of Pakistan. Statistical tools such as correlation and regression have been used to differentiate the impact of KIBOR on both of the banking system (Islamic and conventional), as correlation and regression have been the most widely used techniques. Performance of both of the banking systems has been measured through return on assets and return on equity. To investigate the relationship, KIBOR (interest rate) has been considered as an independent variable, LNTA, IMTA, TETA, LTA, OHETA, GDP, and CPI, have been used as control variables, and return on assets and return on equity have been used as dependent variables. Based on the findings, it has been proved that KIBOR and LNTA, IMTA, TETA, LTA, OHETA, GDP, CPI have certain impact on return on assets and return on equity in conventional and Islamic banks of Pakistan