Abstract
The Canadian financial market is considered to be very conservative and has been using the same practices for a long time. The economies of some countries such as England have adopted a strategy of including Islamic finance in their market and this has produced very satisfactory results. Considering that Islamic finance has been growing in recent years, this type of practice could be relevant to the Canadian market. The objective of this article is to analyze whether the performance of Islamic financial institutions is comparable to traditional banks. A comparison of the efficiency of conventional and Islamic banks will be important to determine because they do not operate in the same way and their primary source of income is different. The results revealed that Islamic banks tended to perform better than conventional banks. Performance ratios were in most cases higher for Islamic banks. This observation was confirmed with the use of the data envelopment analysis (DEA) model, which measures efficiency and effectiveness at the bank level. The results show that although some Islamic banks had significantly fewer assets than conventional banks, they were still able to use resources more efficiently. This confirmed that Islamic finance is an option for Canada and that with government support it will be possible to have a stronger economy overall.
Highlights
The North American financial system is one of the only alternatives available to individuals and businesses to be able to deal with all matters relating to savings and investment
While it is true that most of the conventional banks that have been selected come from a similar market, one should not overlook the important differences in return on assets (ROA) performance of Islamic banks
Habib Bank has proven to be efficient despite the fact that its performance ratios were not necessarily high compared to other banks
Summary
The North American financial system is one of the only alternatives available to individuals and businesses to be able to deal with all matters relating to savings and investment. Economists are unable to attribute a specific cause to this crisis, but the bank loans that were the basis of debts (of individuals and companies) clearly contributed to the fall of the stock market. Investors started selling their shares when they learned how much corporate shares were financed by borrowing at the margin. As investors sold some of their shares because of this news, the Dow Jones had fallen by about 13% on October 28, 1929 (Amadeo, 2020) This decline caused other investors to panic and sell their shares for fear of the Dow Jones’ decline. All these problems brought a loss in value of about 30 billion in 1929, which is equivalent to a loss of about 400 billion if we discount the value of the currency (Amadeo, 2020)
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