Islamic Banking and Conventional Banking :performance

TABLE OF CONTENTS

1. INTRODUCTION……………………………………………………………….…....3

2.0 LITERATURE REVIEW…………………………………………………..………4-11

3.0 METHODOLOGY……………………………………………………………..…11-13

4.0 ANALYSIS…………………………………………………………………….....13-16

   4.1 OPERATING PROFIT MARGIN………………………………………………...13

      4.2 NET PROFIT MARGIN…………………………...............................................14

      4.3 RETURN ON ASSET…………………………………………………………...14

     4.4 RETURN ON EQUITY……………………………………………………….…15

5.0 CONCLUSION…………………………………………………………………...…16

REFERENCES………………………………………………………………...……..17-18

Abstract

Islamic banking is now considered an alternative to conventional banking not only to Muslims, but to non-Muslims as its focuses on profit, loss and risk sharing than interest based conventional banking which depends on interest. Conventional banking was build based on interest and have existed long time ago and been developed and structured than Islamic banking which started development just some decades ago. This research project critical review and compare the performance of Islamic banking and conventional banking of some selected Islamic and conventional banks in Malaysia from the period of 2008-2012, with respect to their business volume and performance. This study is conducted in response to doubtful feedback about Islamic banks performance that are required to comply with Islamic business law and need to shun businesses and transaction or contracts that goes contrary to the Islamic laws, even if its profitable, at the same time, the business performance of these banks had been brought to question due to the nature of the competitiveness of banks in the market. This study compares the performance of selected Islamic and conventional banks in order to ascertain their return on investment and also their profitability. The study found that conventional banks performs better than the Islamic banks in terms of the following performance measures, return on assets, return on equity, operating profit margin and net profit margin. Thus the study concludes that conventional banks perform better than the Islamic banks. Therefore further study is recommended using additional performance measures.    

1.   Introduction

This is a research paper that was conducted in order to study and compare the performance of conventional and Islamic banks in Malaysia. Its comprises of five sections, the first section of the research

Paper gives a general introduction to the research study. The aims or the purpose of the research study, provide general overview and background of the study, the section provide the research background and explain the subject matters of the research, which is the presence of both conventional banks and Islamic banks in the banking industry. In this section of the research paper starting with introduction as the first step in the research paper and carried other sub sections, and also highlights of the problem statement, objectives of the research and the rationale used in undertaking this research was stated in this section, the section gives the project overall structure and framework used in the research.