Performance of Islamic and mainstream banks in Malaysia

Abstract

The study found that Islamic banking scheme (IBS) banks have recorded higher return on assets (ROA) as they are able to utilize existing overheads carried by mainstream banks. As this lowers their overhead expenses, it is found that the higher ROA ratio for IBS banks does not imply efficiency. It is also inconsistent with their relatively low asset utilization and investment margin ratios. This finding confirmed our contention that Islamic banking that thrives on interest‐like products (credit finance) is less likely to outshine mainstream banks on efficiency terms. Although Islamic credit finance products may have complied with Shariah rules, their lack of ethical content is not expected to motivate IBS banks to strive for efficiency through scale and scope economies.

Does Liquidity Influence Profitability in Islamic Banks of Bahrain: An Empirical Study?

“…According to (Rosly andBaker, 2003, citer in Rasul, 2013, p. 26) "ROA and ROE are also indicators for managerial efficiency". (Ika andAbdullah, 2011, cited in Rasul, 2013, p. 26), return on deposits indicates the effectiveness of bank in converting deposit into net earnings.…”

Using partial least square discriminant analysis to distinguish between Islamic and conventional banks in the MENA region

“…Iqbal's study revealed that Islamic banks report better equity profitability as well as asset profitability compared with a reference sample from the conventional banks from 1900 to 1998. A study conducted by Azhar Rosly and Afandi Abu Bakar () also showed that the asset profitability and the profit margin of Islamic banks are higher in Malaysia from 1996 to 1999. However, many other empirical studies yielded varying results (Ahmed, ; Kader et al ; Metwally, ).…”

“…Many empirical studies focused on comparing the profitability between Islamic and conventional banks. Some works indicate that Islamic banks are more profitable compared with their conventional counterparts (Azhar Rosly & Afandi Abu Bakar, ; Iqbal, ; Olson & Zoubi, ). However, other empirical studies found different results (Ahmed, ; Kader, Asarpota, & Al‐Maghaireh, ; Metwally, ).…”

“…It concludes that, generally speaking, Islamic banks are well capitalized, profitable, and stable thanks to their profitability ratios which compare favorably with international standards. Similarly, Azhar Rosly and Afandi Abu Bakar () also compared both types of banks in Malaysia in terms of profitability. Using a number of financial ratios, this study covers the period between 1996 and 1999 which corresponds with the height of the Asian financial crisis.…”

Analyzing Islamic Micro Finance Performance with Economic Value Added (EVA): Learning from Baitul Wat Tamwil (BMT) Usaha Gabungan Terpadu Sidogiri Indonesia

“…The company's performance is measured by returns to labor, labor efficiency and return to the proprietor, so that the performance of the company is the result of the overall management decisions are carried out continuously. Suffian and Noor (2009), Benamraoui (2008), Siddiqui (2008), Rosly and Burn (2003) conducted a study on Islamic Banking's financial performance based on financial analysis. Furthermore, Wiyono and Rahmayuni (2010) also noted the importance of financial analysis to measure the success of the performance of Islamic Banking.…”