Abstract
The study aims to answer the research question of what type of banks between Islamic and Conventional banks are doing well on bank level performance in Bangladesh? In order to answer the research question the study uses binary logistic regression. Using 223 observations of 23 convention banks and 7 Islamic banks of Bangladesh during 2003 to 2013, the study shows an existence of a significant difference between conventional and Islamic bank in Bangladesh on profitability, credit risk, capitalization and bank size. The investigation further finds that profitability, efficiency, liquidity and size of Islamic banks are lower than conventional banks in Bangladesh. However, the results confirm that Islamic banks have higher capitalization and better credit risk management than conventional banks in Bangladesh. The study incorporates some significant policy implications for Islamic banks.
Highlights
Recent global financial crisis, forth, GFC put conventional banks (Note 1) in serious difficulties around the world (Choon et al, 2012; Wasiuzzaman & Gunasegavan, 2013)
We focus on investigating the difference between Islamic banks and conventional banks in bank level performance in Bangladesh
A few empirical studies already focus on the comparative studies between Islamic banks and conventional banks in term of profitability, efficiency, risks and other aspects of banking characteristics and reaches conflicting findings
Summary
Forth, GFC put conventional banks (Note 1) in serious difficulties around the world (Choon et al, 2012; Wasiuzzaman & Gunasegavan, 2013). Islamic banking is based on Shariah which does not allow to involve in interest (riba), speculative and dishonest transactions rather it suggests to perform transaction based on risk sharing or profit and loss sharing, PLS sharing assuming real economic transaction backed by real property (Beck et al, 2013). This fundamentals make Islamic banks different from conventional banks theoritically. The conclusion and policy recommendation is explained in the last section
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