Abstract
Two types of banking are operating in the world namely conventional and Islamic. Banks offer different types of products and services for the satisfaction of customer for their financial need. Conventional banks were based on interest while Islamic banks based on free interest banking. Financial ratios techniques applied for the evaluation of financial performance of conventional &Islamic banks of Pakistan. Habib Bank Limited (HBL) & Allied Bank Limited (ABL)are typical examples of conventional bank where as Dubai Islamic Bank Limited (DIBL) & Meezan Bank Limited (MBL) was taken as an Islamic bank. Both types of banks included in the study represent whole banking industry of Pakistan. Three (03) years data were collected from Publication of State Bank of Pakistan SBP) “Financial Statement Analysis of Financial Sector of Pakistan 2009-2011”,(annual reports of respective banks, Islamic banking bulletin and their respective official websites. Analysis reflects, the liquidity ratio of Islamic banks appeared higher as compared to conventional banks, while profitability & solvency ratios of conventional banks are higher as compared to Islamic banks. Debt to asset ratio of Islamic banks seems better than conventional banks due to low debt financed. The growth rate of Islamic banks in Pakistan is comparatively higher than conventional banks in the context of new branches.
Highlights
Two types of banking systems are prevalent in the world i.e. conventional and Islamic
Islamic banking was initiated by two financial institutions i.e. Nile Deltaa and Mit Ghamar and later on, they developed to Islamic banking
The histories of Islamic bank are longer than conventional banks
Summary
Two types of banking systems are prevalent in the world i.e. conventional and Islamic. Islamic banking has been initiated around the sixties in the world. This mode offers different operations as compared to conventional banking which concentrates on the concept of Riba. In 1996, the number of Islamic banks/financial institutions jumped to 166 in 34 countries (Muslims & Non-Muslims). Chapra (2001) highlighted that in 1970’s popularity of Islamic banking increased and is being operated in sixty countries of the world providing their services to their customers Aggarwal, Rajesh and Tarik (2000). HBL being established in 1942, only a few branches in major cities was commissioned to fill the gap and acted as a central bank of Pakistan. In July 1948, the Government established State Bank of Pakistan (SBP) as Semi government organization.
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