Comparative Analysis of Credit Risk of Islamic and Conventional Banks: (A Case Study of Pakistan)

Abstract

The article discusses the components distressing the credit risk faced by banking institutions and systematically recognizes key factors affecting credit risk formation in Islamic banking operations in Pakistan. Moreover, this study compares these factors in Islamic and conventional banking. Islamic banking institutions are equally susceptible to all types of risk specifically the credit risk, likewise in conventional banking. In the continuation of this study we gather the Data of conventional and Islamic Banks from their Audited financial report, further we applied different statistical tools to check out the relation between dependent and Independent variables. We found out that Islamic Bank has higher credit risk than conventional banks due to its shariah binding although conventional banks have less credit risk than Islamic Banks.