Abstract
This study aims to examine the comparative financial performance between traditional and Islamic banks in Bangladesh. The study used secondary data as panel data of banks for 2016-2020. Since the data is secondary, the quantitative approach to research is considered to use financial ratio analysis (FRA). For analyzing the panel data, Decision Analyst Stats 2.0 software was used. This study randomly selected 10 scheduled commercial banks where 5 traditional and 5 Islamic banks. The results found that the financial performance of Islamic banks and traditional banks is satisfactory but more satisfactory in the case of Islamic banks in Bangladesh. The study also found that profitability has increased significantly in the banking sector in the last five years. Based on empirical findings, financial performance indicators significantly affect the financial performance of the baking sector; that’s why policymakers should care about financial performance determining factors and focus on rapid economic growth with risk recovery techniques. The present study is a small attempt to understand the current financial performance of Islamic Banks and Traditional Banks. The findings help the researchers and all parties involved in the banking system understand profitability and its role.
Highlights
The banking system of Bangladesh has a strong economic foundation
The findings showed that Islamic banks are more profitable than conventional banks, but there are significant differences between the two banks
Traditional and Islamic banks have already been able to earn the trust of their clients by providing timely services together
Summary
The banking system, which contributes to the economy of Bangladesh, has been providing various benefits to customers for over 50 years. Without an effective banking system, the current business and economics cannot be run smoothly as it is considered one of the most important modern service industries in the world. In this competitive environment in today's world, banks increase their facilities in favor of their customers to retain them and capture more market share to be a leader. Sixty-one scheduled banks in Bangladesh are functioning very efficaciously. Their current performance and financial situation are quite satisfactory. In Bangladesh, Banks’ have four divisions, namely, State-owned Commercial Banks (6) and Private Commercial Banks (43=conventional bank 33+Islami Shariah-based bank 10), foreign commercial banks (9), and 9 specialized banks (Bangladesh Bank, 2021)
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