Abstract:
The rationale of this study is to investigate and compare the performance of Islamic and
conventional banking in Pakistan and to find out which of the banking streams is
performing better than other and know about the customer satisfaction level. For this
study, sample of five conventional banks and 5 Islamic banks were selected. For in-depth
understanding and sound comparison, key performance indicators were divided into
external and internal bank factors. The external factor analysis includes studying the
customer behavior and perception about both Islamic and conventional banking. Internal
factor analysis includes measure of differences in performance of Islamic and
conventional banks in terms of profitability, liquidity and credit risk. Nine financial ratios
were used to gauge profitability, liquidity and credit risk. Findings suggest in terms of
profitability and liquidity conventional banking leads, while in credit risk management
Islamic banking dominates. Motivating factors for customers of Islamic banking are the
location and Shari’a compliance, while in case of conventional banking it is wide range
of products and services.
