Evaluation of the Financial Performance between Traditional Private Commercial Banks and Islamic Banks in Bangladesh

Asha Dey,S M Akber

doi:10.46281/ijibfr.v4i2.640

Abstract

The paper analyzes and evaluated the performance of Islamic banks and Traditional private commercial banks in Bangladesh with a duration from 2015 to 2019. The basis of the analysis used in this paper is CAMEL test. All the relevant data has collected from the bank’s websites. To measure and compare the performance this paper has used a sample of five Islamic banks and five Traditional private commercial banks. It considered the average ratio of each year. A standard test format (CAMEL tests) has used to analyze the performance of Islamic and Traditional private commercial banks. To justify the reliability of the data this paper has used t-tests. The outcome of this paper says that apart from the quality of the management significant difference doesn’t exist between the performance of Islamic Banks and Traditional private commercial banks in Bangladesh based on CAMEL test. Considering the quality of the management and asset quality Traditional private commercial banks perform better, but for the capital adequacy and liquidity position Islamic banks perform better in Bangladesh.

Highlights

Banking sector is considered as the financial backbone of a developing country
H1: Statistically a significant difference exists between Traditional private commercial banks and Islamic Banks based on CAMEL in Bangladesh
Analysis and Findings To measure and compare the performances of Islamic Banks and Traditional private commercial banks in Bangladesh this paper has used CAMEL test that consists of Capital Adequacy, Asset quality, Management Quality, earning capacity and Liquidity

Summary

Introduction

Banking sector is considered as the financial backbone of a developing country. So, its growth ensures the economic growth of any country. For operating the business within the country there are two main pillars of the banking industry. In banking industry Islamic banking is considered as the fastest growing sector worldwide. The number of scheduled banks in Bangladesh is 60 They are classified in to several categories such as public limited banks, specialized banks, private commercial banks, and foreign banks. Private Commercial Banks are classified into two categories such as: i) Traditional commercial banks: At present 32 Traditional commercial banks are operating their business in banking industry. They follow the traditional fashion to provide banking services.

Methods

Results

Conclusion