Financial performance of Islamic and conventional banks in MENA region: a GLS approach

This study aims to analyze and compare the financial performance of Islamic banks and conventional banks in Indonesia using library research methods. Data sources come from related literature such as scientific journals, articles, previous research reports, and relevant online sources. Bank financial performance is measured through several ratios including capital ratio (CAR), asset quality (NPL), liquidity (LDR), profitability (ROA and ROE), and efficiency (BOPO) which are calculated based on the bank's financial statements. The results of the analysis show that in general the financial performance of both types of banks is in a healthy condition and meets regulatory standards. However, there are differences in performance in several ratios individually. Conventional banks tend to have better performance in CAR, NPL, BOPO, and ROA ratios, indicating better capital quality, assets, operating costs, and profitability. Meanwhile, Islamic banks show better liquidity performance (LDR) and asset growth. However, the difference in performance is not yet fully statistically significant. In general, the financial performance of conventional banks is superior. However, the performance of Islamic banks also experienced an annual increase. To improve competitiveness, Islamic banks need to continue to make improvements, especially in terms of capital, cost management, credit quality, and increasing fee-based products. Both types of banks have developed and operated harmoniously without causing significant financial turmoil. The results of the study are expected to provide a stronger picture of the comparison of the financial performance of Islamic and conventional banks in Indonesia.

This study aims to determine whether there are significant differences in the financial performance of Islamic banking and conventional banking listed on the Indonesia Stock Exchange (IDX) using five financial ratios, namely, Capital Adequacy Ratio (CAR), Non Performing Loan (NPL), Return on Asset (ROA), Operating Expenses Operating Income (BOPO), and Total Asset Turnover (TATO). The method used in this research is descriptive quantitative. The data analysis technique used is the Independent Sample T-test to see if there is a significant difference between the financial performance of Islamic banking and conventional banking. The results of this study indicate that there are significant differences in CAR and TATO ratios between Islamic banks and conventional banks. While in the ratio of NPL, ROA, and BOPO there is no significant difference between Islamic banks and conventional banks. When viewed based on the average value (mean), the financial performance based on BOPO conventional banks are better than Islamic banks. However, when viewed from the CAR, NPL, ROA, and TATO ratios, the financial performance of Islamic Banks is better than that of Conventional Banks.

Purpose: This article investigates the differences in the financial performance of full-fledged Islamic and conventional banks operating in Pakistan. This study also examines the impact of some inter-bank financial factors on the performance of both full-fledged Islamic and conventional banks. Design and Methodology: Annual financial data of 7 banks including (4 full-fledged Islamic and 3 conventional) were extracted from the state bank of Pakistan from 2006 to 2019. To investigate the performance differences between Islamic and conventional banks this study adopts Ordinary Least Square methods. Findings: Results of the study show that ROA for both types of banks is not indifferent to each other. However, the ROE of Islamic banks outperforms conventional banks in Pakistan. The results of the inter-bank factors indicate that LDR has a significant and negative impact on the performance of conventional banks, whereas positive in the case of Islamic banks. The result of the number of employees and branches suggests that opening new branches and recruiting new employees will positively affect the performance of Islamic banks in Pakistan. Implications: These results are beneficial for policymakers of both full-fledged Islamic and conventional banks and the investors of the country. Keywords: Islamic banking, Conventional banking, Profitability, Pakistan

A lot of previous research studied the relationship between audit committee quality and the financial performance of conventional banks before and during the subprime crisis, whereas some other investigations analyzed the same association in the framework of Islamic banks. However, no study has compared these two correlations either before, during, or after the subprime crisis. Several reasons explain the differences, such as the audit committee quality of each bank type, the evaluation method of the financial performance, the research peculiarities, the methodology, the data, and the interpretation. This research aims to compare the impacts of the audit committees’ quality on the financial performance of Islamic and conventional banks between 2010 and 2019. The financial performance measures and audit committees’ determinants of the conventional and Islamic banks concerned 112 banks of each type. The collected data covered four continents: America, Asia, Africa, and Europe. Impacts were compared by using the Generalized Least Squares analysis. The results showed that the audit committee reduced the profitability of two bank types. Moreover, it harmed the conventional banks’ efficiency but reported an unclear effect within Islamic banks. Even so, we noticed that the audit committee had a positive impact on the conventional banks’ liquidity, while the same effect was apparently ambiguous for the Islamic banks’ liquidity. For solvency, the audit committee positively influenced conventional banks while it affected that of Islamic banks.

PurposeThis paper aims to describe a new method for constructing the FintTech Index that measures the development of FinTech in the conventional and Islamic banking sectors in the Middle East and North Africa (MENA). It also tests the effect of this new proxy on the performance of conventional and Islamic banks in MENA countries.Design/methodology/approachUsing data from Islamic and conventional banks in the MENA region between 2010 and 2020, the authors rely on Text Mining Technology with the help of AntConc, principal component and factor analysis. The study also uses the simultaneous equation model to test the interdependent relationship between FinTech and bank performance.FindingsThe study argues that the proposed measure effectively represents the FinTech industry in the MENA financial markets. The results provide micro evidence on the application of FinTech innovation in Islamic and conventional banks to improve their performance, profitability, stability and efficiency. Furthermore, the findings can provide insights for practitioners and researchers interested in implementing FinTech collaboration to enhance the performance of Islamic and conventional banks in the MENA region.Practical implicationsInvestors can leverage this FinTech Index in portfolio investments, trading strategy and hedging in MENA countries. In addition, policymakers can benefit from the challenges outlined in this work to support the development and incubation of FinTech in conventional and Islamic banks. Thus, they can better recognize the new generation of banking services with which they need to deal and collaborate.Originality/valueThis paper makes a methodological contribution to the literature on FinTech search patterns by combining factor analysis with corpus processing software. This is the most comprehensive global FinTech index. In addition, to the best of the authors’ knowledge, this study is the first to examine the simultaneous relationship between the FinTech index and the performance of Islamic and conventional banks.

Bank is an important financial institution so that its performance needs to be maintained in order to work properly and optimally. The purpose of this study is to analyze the comparison of the financial performance of Islamic banks and conventional banks in Indonesia. This research is a comparative quantitative research using a comparison design of two averages from two independent populations. The samples in this study were 2 Islamic banks (Bank Negara Indonesia Syariah and Bank Rakyat Indonesia Syariah) and 2 conventional banks (Bank Negara Indonesia and Bank Rakyat Indonesia). The bank's financial performance assessment method used in this study is CAMEL with financial ratios namely CAR, NPL, NIM, ROA, BOPO, and LDR. Data were analyzed using the mean difference test of two unpaired groups (independent sample t-test). The results of this study indicate that there are significant differences in the ratio of NPL, ROA, BOPO, LDR between Islamic banks and conventional banks. The results of the analysis show that the financial performance of Islamic banks is better based on the ratio of NPL, NIM, BOPO, LDR. While the financial performance of conventional banks is better based on the ratio of CAR, ROA.

Banks as financial institutions need to maintain their performance in order to operate optimally. Moreover, Islamic banks must compete with conventional banks which are dominant and growing rapidly in Indonesia. This increasingly sharp and tight competition must be accompanied by good and orderly management in order to survive in the banking industry for a long time. One of the factors that must be considered by a bank in order to survive is the bank's financial performance. Comparison of the financial performance of conventional banks and Islamic banks is carried out using financial ratios in the form of the dependent variable ROA and the independent variables CAR, NPL/NPF, LDR/FDR taken from annual reports for the 2011-2020 periods. The analysis technique used panel regression. The result obtained is that there is a significant difference in the level of bank soundness between conventional banks and Islamic banks. Based on a comparison of financial ratio analysis, the financial performance of conventional banks is better in terms of the LDR/FDR ratio, while the financial performance of Islamic banks is better in terms of CAR and NPL/NPF ratios.

Accounting as a complement (tahsiniyat) can turn into a necessity (hajiyat) at the maqashid level. Maqashid sharia is not the most decisive factor in giving birth to sharia economic products that can play a dual role as a tool of social control and socio-economic engineering to realize human benefit, sharia maqashid can provide philosophical and rational dimensions to sharia economic law products that are born in economic ijtihad activities contemporary sharia. Islamic banking, which is growing and developing in the country, is currently increasingly in demand by investors and potential investors. However, the problem is that people do not know how far the performance of Islamic banking is, when compared to the performance of conventional banks which first operated. This study is intended to compare the performance of the two banks, this is important so that investors, potential investors know and assess the performance of the two banks. Assessment of financial performance can be seen from the financial ratios of CAR, ROA, ROE, NPL, LDR, and BOPO. The research population is 14 Islamic commercial banks. The sample using purposive sampling, using 3 Islamic banks, Bank Negara Indonesia (BNI) Syariah, Bank Rakyat Indonesia (BRI) Syariah, Bank Mandiri Syariah and 115 conventional banks. Research data from the annual financial statements of the banks under study. The data analysis technique used the Mann-Whitney U Test. The results showed that there was no significant difference in the CAR ratio between Islamic banks and conventional banks. The ratio of ROA, ROE, NPL, LDR and BOPO there are significant differences between Islamic banks and conventional banks. The financial performance of Islamic banks is better in terms of the LDR ratio, while the financial performance of conventional banks is better in terms of the ratios of CAR, ROA, ROE, NPL, BOPO.

PurposeThe aim of this paper has twofold: (1) to explain and compare the financial evolution of Islamic and conventional banking sector in the Gulf Cooperative Council (GCC) countries before and during the COVID-19 pandemic and (2) to explore the key success factors that might affect Islamic and conventional banks performance before and mainly during COVID-19 pandemic period.Design/methodology/approachOrbis Bank Focus database and annual financial reports are used to collect financial information of Islamic and conventional banks in GCC countries over four years: 2017, 2018, 2019 and 2020. Descriptive statistics, T-test, multiple regression, and 2SLS and GMM models are employed to analyze the financial structure and performance of Islamic and conventional banks before and during the COVID-19 pandemic period.FindingsResults of this study reveal that (1) there is a significant difference between Islamic banks and conventional banks during the crisis of COVID-19, where the conventional banks have presented a higher level of financial performance and financial liquidity than their Islamic counterparts, (2) conventional banks have revealed higher capacity to manage their financial risk during the crisis period, and (3) a high level of non-performing loan, high inflation rate and high percentage of non-important cost have a negative impact on the financial performance of Islamic banks mainly during the pandemic period of COVID-19. However, the result indicates that a high level of liquidity risk increased the performance of Islamic banks but this impact falls sharply during the pandemic period.Originality/valueThis study provides information that supports investors, regulators and executive managers in GCC countries. A well-structured balance sheet would improve the financial performance and risk management of the banking sector in GCC countries, especially in times of crisis and pandemics.

PurposeThe purpose of this study is to critically evaluate how conventional and Islamic banks trade off risk, efficiency and financial performance in their business models, to investigate how patterns of risk and efficiency vary between conventional and Islamic banks and to critically evaluate how the profitability of conventional and Islamic banks varies following the financial crisis.Design/methodology/approachThis study uses univariate and multivariate statistical techniques by investigating 12 Islamic banks and 34 conventional banks operating in the Gulf Cooperation Council (GCC) region has been studied over the period 2011–2018.FindingsThe results suggest that Islamic and conventional banks differ not in the levels of efficiency, risk and profitability, but rather in how risk and efficiency influence banks’ financial performance. Islamic banks are found to be less influenced by the adverse effects of credit risk, which is consistent with the risk-sharing nature of Islamic financing. However, the results only hold for return on assets (ROA) and return on equity (ROE) while the net interest margin is observed to be negatively influenced by credit risk. Lower cost-income efficiency is also found to boost ROA and ROE of Islamic banks which could be attributed to a larger share of non-interest revenues due to Sharīʿah-compliance.Research limitations/implicationsFrom a theoretical point of view, this study helps to understand the risk, efficiency and financial performance of Islamic banks in comparison with conventional banks.Practical implicationsThe results of this study can serve bank managers, regulators and shareholders. Policymakers should encourage a more risk-sharing structure of Islamic financing as it brings less adverse effects of credit risk and increases income sustainability for Islamic banks. The present study may help bank managers to improve the financial performance of their firms by controlling risk and efficiency. The study results also have implications for shareholders and depositors of Islamic and conventional banks as they should have a predetermined position about the level of credit risk and efficiency in each banking system.Originality/valueThe foremost contribution is that this is one of the few studies to compare risk, efficiency and financial performance of Islamic and conventional banks in the GCC region. By using the latest data, this paper hopes that the findings will be more relevant than previous studies to the current situation of the banking industry in the region.

According to the literature review, the analysis results of the impact of ownership structure quality on financial performance within conventional and Islamic financial institutions are contradictory. In our study, we performed a fine differential analysis aimed at resolving this ambiguity. The financial performance and ownership structure variables of conventional and Islamic banks were collected from 16 countries located in three continents: Europe, Asia, and Africa. Two samples were collected that each of them is composed of 63 banks. By using the OLS method, these panel data were compared to the impact of ownership structure on the financial performance between both types of banks in the agency theory framework during the period 2010-2018, giving us 567 bank-year observations in each sub-sample. Results revealed that the ownership structure of conventional banks has had an explained ambiguous impact on its financial performance, whereas that of Islamic banks has a positive effect. Overall, the impacts of the Chief Executive Officer (CEO) shareholding and the board’s chairman shareholding are more significant on the financial performance of conventional banks than those of impacts related to Islamic banks.

The presence of Islamic banks with the concept of profit sharing has created new competition in the national banking business. Since its inception, Islamic banks have been required to improve their performance to compete with conventional banks, which have long dominated the market share. This study aims to compare Islamic and conventional banks' financial performance in Indonesia for the 2016-2020 period. The research method used is comparative research with a quantitative approach. The research sample consisted of Islamic and conventional banks, each taken by the five largest banks based on asset value. Samples were taken using a purposive sampling technique. Data collection techniques using documentation. The data type used is secondary data in the form of financial ratio reports obtained through the official OJK website. Data analysis techniques used descriptive and comparative analysis in the form of independent sample t-test and Mann-Whitney test. The results of this study indicate that Islamic banks have better performance than conventional banks in terms of the CAR ratio. However, when viewed from the ratio of NPL/NPF, ROA, NIM/NOM, BOPO, and LDR/FDR, Conventional Banks have a better performance. Based on the results of the different tests, it was found that there was no significant difference between the performance of Islamic banks and conventional banks when viewed from the CAR ratio. However, when viewed from the ratios of NPL/NPF, ROA, NIM/NOM, BOPO, and LDR, there are significant differences between the financial performance of Islamic and conventional banks.

This study aims to analyze whether there is an influence of Islamic Corporate Governance, Islamic Social Responsibility, Intellectual Capital, Sharia Bank Indonesia Certificates and Profit Sharing Levels on the Financial Performance of Islamic Commercial Banks in Indonesia for the 2016-2020 period. The type of data used is secondary data obtained from the financial reports of banks, BI and OJK through published institutional reports which were analyzed using multiple linear regression with the help of the E-Views 10 Program. The results of this study are the variables Islamic corporate governance, Islamic social responsibility, and Islamic corporate governance. intellectual capital, and Bank Indonesia Sharia Certificates partially have no effect on the Financial Performance of Islamic Commercial Banks in Indonesia in 2016-2020. while the Profit Sharing Variable has an effect on the Financial Performance of Islamic Commercial Banks in Indonesia in 2016-2020. Variables Islamic Corporate Governance, Islamic Social Responsibility, Intellectual Capital, Bank Indonesia Sharia Certificates and Profit Sharing Levels Simultaneously on the Financial Performance of Islamic Commercial Banks in Indonesia in 2016-2020.
 Keywords: Islamic Bank, Financial Performance, Quantitative

The main objective of this paper is to give an overview of comparative financial performance of Islamic banks with conventional banks based on the CAMEL method. The main question would be answered to know there is difference in the performance of conventional banking and Islamic banking are analyzed by using the ratio CAMEL. To prove the hypothesis that there is no significant difference between the bank's financial performance Islamic and conventional banks (Ho) or there are significant differences between the financial performance of Islamic banks and conventional banks (Hi). Researchers used a parametric statistical technique, which consists of test data normality using the Kolmogorov Smirnov test and QQ plots, test of homogeneity using the F test (Levene's Test), and Independent Sample T-Test with significant value 5% confidence level (1 - α) = 95%. The results showed that the ratio of data CAMEL Islamic banks and conventional banks in normal distribution and homogeneous. Then it can be concluded that the variable CAR, NPL, and LDR between conventional banks and Islamic banks have significant differences, while the ROA and ROE of the two types of banking industry is not significantly different or relatively the same.

This article tries to compare the financial performance of Islamic banks and conventional banks, to find out which of the two bank models has better performance. The research method used is descriptive with the CAMEL analysis approach, the selected sample is the 2018 monthly financial statements of BRI Syariah, BRI Conventional, Mandiri Syariah, and Mandiri Conventional. The results show that in general the financial performance of conventional banks is better than Islamic banks.