Comparison of the financial performance of Islamic and conventional bank in Malaysia during and after economic crisis

Abstract

This paper is a continuation of our former work. In this paper, we compare the financial performance of the two banking systems that exist in Malaysia over two periods of time, during economic crisis (1997)(1998)(1999) and after economic crisis (2001)(2002)(2003). In order to see the conventional as well as Islamic bank's performance over these two periods of time, the study uses 10 financial ratios which are broadly categorized into 4 groups: (a) profitability ratios; (b) liquidity ratios; (c) risk and solvency ratios; and (d) efficiency ratios. Next, the study used T-test in determining the significance of the differential performance of the two banks over two periods of time. By using inter-bank comparison, the study found that, conventional bank has better performance, efficient, more profitable and has greater risk as compared to Islamic bank. However, in terms of utilizing asset, Islamic bank is better than conventional bank. As an overall, conventional bank is better in much aspect due to the longer history and experience in the industry than Islamic bank that start their operation in 1983.

Financial performance of conventional and Islamic banks in Bahrain: a comparative study

“…Therefore, the null hypothesis cannot be rejected. This result agrees with Rashid and Jabeen (2016), but it contradicts the results of Kadir et al (2013) and Malhotra, Poteau, and Singh (2011).…”

“…This result is consistent with Rashid and Jabeen (2016). However, it contradicts the findings of Kadir et al (2013) and Malhotra, Poteau, and Singh (2011). The number of branches is proved to have a significant influence on bank performance.…”