International Journal of Business Reflections, Vol 1, No 2 (2020)

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ANALYZING FINANCIAL PERFORMANCE OF ISLAMIC AND CONVENTIONAL BANKS OF PAKISTAN: A COMPARATIVE STUDY

Rida Akram, Aiman Tahir

Abstract


This study is conducted to analyze the financial performance of Islamic banking sector with conventional banking sector of Pakistan for the year 2015-19. For comparative analysis of Islamic banking sector with conventional banking sector 3 major and their 6 sub ratios containing liquidity ratio, capital ratio and profitability ratio over the period of 2015-2019 are used.  Secondary data is used from annual Islamic Bulletin reports, Reports of State bank of Pakistan, various financial reports of conventional banking sector, World Bank forum and relevant articles over the period of 2015 – 2019. The comparison of Islamic banking sector with conventional banking sector has shown that Islamic banking sector is performing better in terms of profitability whereas, conventional banking sector is better in terms of risk absorbing ability and unexpected loss bearing. In terms of capital assets to total assets conventional banking’s performance is going better with the passing years. In terms of liquidity conventional banking sector is in better position as compared to Islamic banking sector. Islamic banks need to focus on liquidity and capital asset ratios to get better results in future. Islamic banking industry is getting better with the passing years in term of profit and market share which is a positive sign. Islamic banking is expanding its network with more and more branches every year to facilitate customers. This research will guide higher management to make relevant policies that will play important role in improving growth and profitability of that indicator that is showing less profit.


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