Abstract:
Purpose
The purpose of this paper is to compare the financial performance of Islamic banks
against conventional banks in Pakistan. Financial ratios include profitability, capital
adequacy, liquidity, efficiency and asset quality.
Methodology & Design
A total of 8 banks (four conventional and four Islamic) were considered over the period of
2006-2017. To determine whether these differences are significant, independent t-tests were
carried out on each variable.
Findings
It is found that the all variable like profitability, liquidity, efficiency and asset quality shows
significant performance in conventional bank rather than the Islamic bank. While capital
adequacy showed significant performance in Islamic bank rather than the conventional bank.
Originality/value
This paper looks at the ccomparison between Islamic and conventional banking systems in
Pakistan. Contrasting results were found from the independent t-tests, which makes it an
interesting study that should be pursued further.
Limitations
The sample size oflimited in terms of breath and width. More banks should be added which
spread over multiple periods with quarterly results.
Recommendation
The study should incorporate macroeconomic indicators to identify the indicators which
influence the profitability, efficiency, quality and liquidity ofconventional and Islamic banks.
