A comparative study of Islamic vs. conventional banks and financial performance in context of Malaysian banks

Abstract

The objective of this study is to evaluate the comparative financial performance of Islamic and conventional banks. To undertake a rigorous comparative study, profitability, liability and liquidity ratios of Islamic banks and conventional banks were used during the period from 1995 to 2009. Banks are selected on the basis of almost having equal weights of invested capital. Financial products offered by Islamic banks are also compared to conventional banks products for better understanding of the institution. A paired sample t-test is used which shows that Islamic banks have high growth rates and profitability over the conventional banks. Moreover the Islamic banks have high liquidity power over conventional banks.