Conventional Banks In Bangladesh Research Articles

THE EFFECT OF BANK-SPECIFIC AND BANK RISK ON BANK STABILITY AS MEASURED BY NPL OF THE BANGLADESHI COMMERCIAL BANK

This paper analyzed the effects of bank-specific and bank-risk drivers on bank stability as measured by non-performing loans(NPL) of commercial banks in Bangladesh from 2011 to 2021.This study used panel linear regression, and panel corrected standard error (PCSEs) to estimate the model. The main objective of the study was to analysed the effects of bank specific and bank risk on bank stability of conventional banks in Bangladesh. Capital adequacy, asset quality, income diversification, bank competition, managerial efficiency, and profitability (ROE) are used as proxies for bank-specific and liquidity risk; Sensitivity to marketing risk is used as proxies for bank risk, while control variable is used as bank size and non-performing loan (NPL) are used as a proxy for measurement of bank stability. The main results show that capital adequacy and profitability (ROE) are negative, but asset quality, income diversification, bank competition, and managerial efficiency are positively related to the NPL. The results further evaluate those determinants of bank risk, liquidity risk, and marketing risk have a positive impact on the NPL. The control variable bank size has a negative impact on the NPL. Based on our results, authorities in Bangladesh may develop rules for managing operations and ensuring bank stability as measured by NPLs.

Impact of Macroeconomic Factors on Performance of Banks in Bangladesh

The present study investigates the impact of macroeconomic factors on the performance of banks in Bangladesh. The study analyzed 25 commercial banks consisting of both Islamic and conventional banks in Bangladesh from 2012 to 2021. The data was analyzed using the ordinary least square (OLS) regression model. Return on assets (ROA) is the dependent variable while macroeconomic variables such as GDP growth (GDPG), inflation (INF), and unemployment (UNEP) are the independent variables. The regression results showed that unemployment rate have a significant impact on the return on assets for banks in Bangladesh banks. There was no significant impact between GDP growth and inflation on the return on assets. Policymakers should consider the impact of unemployment rates on bank performance when making economic policy decisions, with a focus on reducing unemployment rates to improve bank performance. This has been particularly relevant during the COVID-19 pandemic, where policies to prevent widespread unemployment could have positive effects on bank performance

A Comparative Study between Islamic Banks and Conventional Banks in Bangladesh Based on Satisfaction of Debit Card Users

This study is about the measuring of customer satisfaction on debit card use where little attention has been paid to this issue in Bangladesh. Previous studies on Islamic banks and conventional banks were focused on different determinants of customer satisfaction but very few studies on debit card user. The research aim is to identify the level of debit card user satisfaction and its determinants between Islamic banks and conventional banks. For this purpose, a well-planned questionnaire was developed to ensure success and also by providing questionnaires to 300 debit cards holder from Islamic banks and traditional banks using the convenience sampling technique. In this study, bi-variate and regression model were employed to identify the important predictors that affected customer satisfaction regarding debit cards of both types of banks. The study discovered that the customers of conventional banks were more pleased with the overall quality of service than that of Islamic banks were providing. More importantly, traditional banks had security and responsiveness as the driving forces, whereas Islamic banks, as an exception, availability of money and transaction cost were considered less important in customer satisfaction. The most important measures represent the procedures banks may use to tailor their services to individual consumers' needs.

Relationship between Corporate Disclosure Score and Different Corporate Determinants: Evidence from Conventional Banks in Bangladesh

The main goal of this study is to evaluate the relationship between corporate disclosure scores and their different determinants. To achieve this aim, secondary data have been employed and collected from the five years annual reports of the ten sample banks. To reveal consolidated disclosure scores, this study used an unweighted disclosure checklist. It has been found that the mean value of the tight disclosure score of the sample bank_9 is 76.45 percent which is higher, and the lowest mean value of the consolidated disclosure score is 71.24 percent, which is visible in the case of sample bank_8. Furthermore, there is no significant variation in tight disclosure scores among the sample banks over the study period. This study has considered the various corporate determinants and employed the ANOVA test and multiple regression analysis to evaluate the relationship between the different corporate determinants and corporate disclosure scores. The results of the ANOVA test illustrated that there is significant variation in other determinants of corporate disclosure among the sample banks. The findings of multiple regression analysis indicate that the R square value is 0.717, which confirms that the dependent variable, like the level of corporate disclosure, is explained by 71.70% of the independent variables, such as total assets, total revenues, number of branches, number of employees, meal members, female members, independent directors, audit committee members, capital adequacy ratio, debt equity ratio, loan deposits ratio and debt assets ratio. The results of the model summary report that the significance level of the overall model is lower than 5%, which means that the entire independent variables have significantly influenced the corporate disclosure score.

Performance Comparisons of Islamic and Conventional Banks in Bangladesh, Malaysia and Pakistan

Performance Comparisons of Islamic and Conventional Banks in Bangladesh, Malaysia and Pakistan

Investigating Structural Relationships among Service Quality Dimensions, Customer Satisfaction, and Customer Loyalty for Conventional Bank Customers: Evidence from Bangladesh

Customers of the banks are highly servicing sensitive in Bangladesh. The quality of service has become an integral part of customer satisfaction. Day by day, It has been demonstrated that customer satisfaction and loyalty are linked to service quality. There is also a link between service quality and customer satisfaction, and customer loyalty in banks. Therefore, this paper investigated the effect of service quality factors on customer satisfaction and the relationship between customer satisfaction and customer loyalty in conventional banks in Bangladesh. A survey was conducted on 13 different conventional banks in Bangladesh. Using simple random sampling, 220 customers were selected as a sample from selected conventional banks for this study. The research was carried out using a structured questionnaire. The SPSS software was used to analyze the demographic data. Multivariate analysis technique like Factor Analysis and Structural Equation Modeling (SEM) was used to identify the influential factors for the bank's customer loyalty by using SmartPLS3 software. The study found that all service quality factors such as assurance, reliability, responsiveness, and tangibility are the influential factors except empathy.

Inefficiency patterns in family-owned banks in Bangladesh

PurposeMulti-directional efficiency analysis (MEA) is an alternative methodology to data envelopment analysis (DEA) that investigates the improvement potentials in each input and output dimension and identifies a benchmark proportional to these potential improvements. This results in a more nuanced picture of the sources of the inefficiency providing opportunities for additional conclusions about which variables the inefficiency is mainly located on. MEA provides insights into not only the level of the inefficiency but also the patterns within the inefficiency, i.e. its sources and location. This paper applies this methodology to Bangladeshi banks to understand the differences in the inefficiency patterns between different subgroups.Design/methodology/approachThis paper analyses the difference in the pattern of inefficiency between the older family-dominated banks and the newer non-family-owned banks in Bangladesh using the recently developed MEAs technology, which enables analysis of patterns within inefficiencies rather than only levels of (in)efficiency. The empirical results show that whilst there are few significant differences in the levels of variable-specific efficiency scores between the two subgroups, there are clearer differences on the inefficiency contributions from particular outputs in most of the study period and also on most variables in the time window of 2007–2009. This finding provides clues to differences in business models and management practice between the two types of banks in Bangladesh.FindingsThe empirical results show that whilst there are few significant differences in the levels of variable-specific efficiency scores between the two subgroups (older family-dominated banks and the newer non-family-owned banks), there are clearer differences on the inefficiency contributions from particular outputs in most of the study period and also on most variables in the time window of 2007–2009, during the Global Financial Crisis (GFCs). This finding provides clues to differences in business models and management practice between the two types of banks in Bangladesh.Practical implicationsDEA is a conventional tool for benchmarking in management science. However, conventional benchmarking exercises based on DEA do not reveal significant differences in the sources of inefficiency that show differences in business models. While DEA remains the most utilized technique in the efficiency literature, we think that a more flexible and deeper analysis requires something like MEA.Originality/valueThe contribution is twofold. First, examination of performances of family-owned firms is a well-established but analysis of performances of family-dominated banks is relative scarce. Secondly, isolating the sources of inefficiency which differs between types of banks even if there is no difference in inefficiency levels is absolutely new for a complete data set of conventional banks in Bangladesh. It turns out that there are few (significant) differences between the groups in terms of the inefficiency levels, whereas clear patterns emerge in terms of differences in inefficiency contributions between family-dominated and non-family-owned banks, during the Global Financial Crisis

BENEFITS THAT ISLAMIC AND CONVENTIONAL BANKS CAN ATTAIN BY IMPLEMENTING GREEN BANKING

This paper aims to ascertain the benefits that Islamic and conventional banks inBangladesh can reap by implementing green banking, and also the drivers thatmotivate banks to behave environmentally. The Green Compliance Index (GCI) wasintroduced here to measure banks’ environmental behaviour. It was prepared basedon central bank guidelines. In this study, with the participation of all 40 privatecommercial banks (PCBs), 32 conventional banks and 8 Islami Shariah-based PCBs,firm specific variables were collected through content analysis of the GCI. Structuralequation modelling-partial least squares (SEM-PLS), together with the bootstrappingmethod, were used to evaluate the research data. These were collected and sortedfrom the FY annual report of 2018. For further support, a generalized linear model(GLM) was used to assess the outcomes. The results show that the effects of greencompliance on possible benefits are significantly higher for Islamic banks. In contrast,these banks comply less with the green banking codes than conventional banks do inBangladesh. Company size and the independence of bank directors appear to have asignificant influence on compliance with the green banking codes, while governancedoes not show such an association for either group of banks. As Islamic banks havea greater scope to attain benefits, policymakers should introduce more interactivegreen banking products and loan schemes for prospective consumers, especially inindustrial sectors where there is a greater possibility of being sustainable andenvironmentally friendly. Based on the findings, policy recommendations are madefor practitioners, regulators and future researchers.

DETERMINANTS OF CREDIT RISK: A COMPARATIVE ANALYSIS BETWEEN ISLAMIC AND CONVENTIONAL BANKS IN BANGLADESH

The paper investigates the determinants of credit risk of Islamic and conventional banks in Bangladesh. In so doing, it collects data from 30 private commercial banks comprising of seven Islamic banks and 23 conventional banks for the period 2001–2018. Collected data are analyzed using GMM estimation technique. This method is perceived to be robust because it reduces the endogeneity problem that exists in the panel data set. Analysis of data shows that among the macro-economic variables, GDP growth decreases credit risk, whereas real interest rate and inflation increase credit risk. Bank-specific variables prove that both clusters of banks suffer from adverse selection and moral hazard problems. Results also indicate that competition has a risk-enhancing effect on banks, which supports the competition-fragility nexus. Further analysis shows that board size and board independence affect the credit risk of both clusters of banks. Findings of this study suggest some policy implications from macro, bank and governance perspectives. Specifically, banks should adopt ‘speed limit’ policy to reduce the poor quality loan. Also, competition in the banking industry should be regulated. Finally, central bank should maintain uniform capital adequacy ratio for both clusters of banks. Although this study is limited to private commercial banks in Bangladesh, the results can be generalized for other emerging economies.

Islamic Banks vs. Conventional Banks in Bangladesh: A Comparative Study Based on its Efficiency in Operation

The main purpose of this study is to make a comparison between Islamic banks (IBs) and Conventional banks (CBs) in Bangladesh based on its efficiency in operation. The Data Envelopment Analysis (DEA) is employed under CRS and VRS approach, which allows for the decomposition of efficiency into technical, allocated and cost efficiency. The study also measures changes in productivity over the time as a result of technical progress by employing the Malmquist Total Factor Productivity Index. The results explain that the technical efficiency of IBs is better than that of CBs, but allocated and cost efficiency (CE) of IBs are higher than CBs. In Bangladesh there are 62 commercial banks included 8 Islamic Banks that are regulated by Bangladesh Bank (BB).

Exploring green banking performance of Islamic banks vs conventional banks in Bangladesh based on Maqasid Shariah framework

PurposeEnvironmental degradation has been identified as one of the major impediments for development in Bangladesh. The World Health Organization has ranked Bangladesh fourth among the most polluted countries in the world. Faced with this challenge, the Government of Bangladesh introduced the Green Financing Policy and encouraged banks to participate in offering green financing as part of the efforts to promote environment-friendly economic activities for sustainable economic development. This study aims to examine the financial performance of selected commercial banks that offered green financing in Bangladesh in the period from 2012 to 2014.Design/methodology/approachIn achieving this objective, the paper has divided the various sections of green banking policy under Maqasid Shariah framework of Imam Al-Ghazali, which is preserving faith, life, intellect, posterity and wealth. After that, green performance is compared between five conventional banks and five Islamic banks, according to the secondary data gathered from the annual reports and sustainability reports, as well as verified based on interviews. Finally, based on quantitative and qualitative thematic analysis approach, it is identified which banks meet most of the Shariah objectives along with performing sustainably.FindingsThe study finds that none of the banks fully meet the green/sustainable policy requirements; however, the Islamic banks are ahead in preserving faith, intellect and wealth circulation.Research limitations/implicationsThis research is mostly based on secondary data; banks’ non-disclosure of green data was an impediment to run in-depth and fair comparisons. However, to check the reliability and validity of secondary data, two heads of sustainable banking department from conventional bank and two from Islamic bank have been interviewed.Practical implicationsBased on the findings, several recommendations are made on ways to expedite green financing, which can ultimately enhance contribution of Islamic banks toward the sustainable economic growth of the country while fulfilling Maqasid Shariah.Social implicationsBecause the green banking policy aim is very much in line with Maqasid Shariah which is the aim of Islamic banks, Islamic banks can presumably contribute more to the sustainable economic growth of the country by aligning their entire operations with green policies.Originality/valueTo the best of the authors’ knowledge, this study is perhaps the earliest initiative to compare Islamic and conventional banks’ green performances in Bangladesh.

Underpinning the benefits of green banking: A comparative study between Islamic and conventional banks in Bangladesh

This study aims to compare environmental motives and performance of conventional and Islamic banks in Bangladesh. Green compliance index was developed based on the Bangladesh Bank (the central bank of Bangladesh) guidelines whereas information regarding governance variables is collected from the annual reports of 9 Islamic and 31 conventional banks. Results show Islamic banks are more environmentally friendly compared to their conventional counterparts. Board size is negatively related to green compliance whereas board independence and auditor's type do not have any significant influence on green compliance for both clusters of banks. Compliance with green banking policies enhances the reputation for Islamic banks and accountability and profitability for conventional banks. Results of this study provide useful information for regulatory authorities to formulate policies that are conducive to enhance bank's environmental performance.

Financial Stability of Islamic and Conventional Banks in Bangladesh: Revisiting Stability Measures and Analyzing Stability Behavior

Financial Stability of Islamic and Conventional Banks in Bangladesh: Revisiting Stability Measures and Analyzing Stability Behavior

Influence of Internal and External Governance Mechanisms on Corporate Governance Disclosure among Islamic and Conventional Banks

The purpose of this paper is to investigate the extent of corporate governance disclosure in the annual reports of listed conventional and Islamic banks in Bangladesh. Out of fifty-six scheduled banks in Bangladesh, a sample of thirty-nine banks is selected, and data for the sample is extracted from the annual reports covering a period of 2011 to 2014. As such, the study focused on the extent of CGC after the stock market crisis in 2010 in Bangladesh. This results in the final observations of 116 which were used to perform balanced panel regression analysis. Fixed effect model is found significant for the balanced panel model which indicates that appointment of large audit firms negatively affects the extent of corporate governance compliance. Pooled OLS regression established that while profitability has a negative influence, the size of banks positively affects the extent of CGC. This study has focused on the commercial banks and thus results obtained from the study may not be representative for public and foreign banks operating in Bangladesh. Statistical evidence provided by the study provides guidelines for the policymakers toward necessary governance reforms required for banks to successfully operate in a post-crisis environment. Factors established by the study that influences corporate governance compliance using a balanced panel model are unique in the context of developing countries. Evidence of a difference in governance compliance between Islamic and conventional banks in Bangladesh establishes a new research arena and a necessary shift from the traditional performance comparisons.

Comparisons of Financial Performance of Islamic Banks and Conventional Banks in Bangladesh

The study has been examined and compared the performance of Islamic and Conventional banks in Bangladesh during 2010 to 2014 by analyzing CAMEL tests standard factors such as capital adequacy, asset quality, management quality, earning ability and liquidity position. The financial data for this study have taken from the banks’ financial statements existing on the banks’ websites. A sample of 5 Islamic banks and 5 Conventional banks has been selected to measure and compare their performance. Each year the average ratios were considered. CAMEL tests which is a standard test to check the health of financial institutions was used to determine the performance of Islamic and Conventional banks. The researchers have used the t-tests to justify the data. The study has shown that statistically there is no significant difference between Islamic banks and Conventional banks based on their performance calculated by CAMEL except management quality. The management qualities and asset qualities of Conventional banks are better than that of Islamic banks. On the other hand, Capital adequacy and liquidity position of Islamic banks are better than that of Conventional banks.

Resiliency between Islamic and conventional banks in Bangladesh

PurposeThe purpose of this paper is to examine the resiliency between conventional banks (CBs) and Islamic banks (IBs) in Bangladesh at the financial crisis, pre-crisis and post-crisis period.Design/methodology/approachData from 25 banks, 18 CBs and 7 IBs, operating in Bangladesh during the period 2005-2014 have been collected and divided into three stages: the pre-crisis period (2005-2006), the crisis period (2007-2008) and the post-crisis period (2009-2014). Dynamic generalized method of moments and quantile regression analysis have been used for this study.FindingsThis paper uses Z-score as an indicator of bank stability and found a significant difference in stability between IBs and CBs during the financial crisis. In addition, this paper also tries to identify the type of banks that performed better during pre-crisis, crisis and post-crisis periods but found no significant differences between IBs and CBs in this regards. For robustness, quantile regression found that the statistical significance level of credit risk, capital adequacy ratio and efficiency ratio of CBs and IBs differ at different percentile.Originality/valueMost of the previous studies were conceptual or narrative and conducted on a global basis, not country-specific. To filling the country-level research gap, this study provides a meaningful insight about how these two types of banks performed in different periods.

Comparisons of Financial Performance of Islamic Banks and Conventional Banks in Bangladesh

The study has been examined and compared the performance of Islamic and Conventional banks in Bangladesh during 2010 to 2014 by analyzing CAMEL tests standard factors such as capital adequacy, asset quality, management quality, earning ability and liquidity position. The financial data for this study have taken from the banks’ financial statements existing on the banks’ websites. A sample of 5 Islamic banks and 5 Conventional banks has been selected to measure and compare their performance. Each year the average ratios were considered. CAMEL tests which is a standard test to check the health of financial institutions was used to determine the performance of Islamic and Conventional banks. The researchers have used the t-tests to justify the data. The study has shown that statistically there is no significant difference between Islamic banks and Conventional banks based on their performance calculated by CAMEL except management quality. The management qualities and asset qualities of Conventional banks are better than that of Islamic banks. On the other hand, Capital adequacy and liquidity position of Islamic banks are better than that of Conventional banks.

Comparative Analysis of Financial Performance of Islamic vs. Conventional Banks in Bangladesh

This paper analyzed the financial performance of Islamic and Conventional commercial banking sector in Bangladesh for the period of 5 years from 2008 to 2012. Financial ratios were employed to measure the profitability and performance of banks; in addition Analysis of Variance (ANOVA) was used to test the significance differences of profitability means between Islamic and Conventional banks groups. The study found that overall bank’s financial performance increased considerably in the first three years of the analysis. A significant change in trend is noticed from year 2011 to 2012 as a result of stock market bubble bust at the end of 2010. Bangladeshi banking sectors financial performance faced a decreasing trend from 2011 due to significant investment of their fund in stock market. The study found that, there is no significant means difference of profitability between Islamic and Conventional banks groups in term of ROA, ROE and EPS. However, a significant difference in financial performance is existed in term of years.

Comparative Performance Analysis between Conventional and Islamic Banks in Bangladesh- An Application of Binary Logistic Regression

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.

Efficiency of Islamic and Conventional Banks in Bangladesh : Comparative Study Using DEA Approach

This study involves comparing the efficiency between Islamic and conventional banks in Bangladesh using the Data Envelopment Analysis. It considers 25 commercial banks, of which seven are Islamic, while eighteen are conventional, covering the period from 2009 to 2013.The study finds that the Islamic banks have been pure technically efficient but their scale efficiency is not satisfactory, suggesting that scale inefficiency is the main source of inefficiency of the Islamic banks. In contrast, the conventional banks are found to be pure technically inefficient, but their scale efficiency is satisfactory. The study hopes to contribute towards providing important inputs for the betterment of the banking industry in Bangladesh.