Comparison between Islamic banking and conventional banking to invent performance and customer satisfaction level

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.