Comparative Analysis of Performance of Islamic Vis a Vis Conventional Banking of Pakistan during Global Financial Crisis 2007-2010

By Dr Ambreen Zeb

Abstract

This study aims to conduct a comparative analysis of performance of the impact of global financial crisis on Islamic and conventional banking in Pakistan during the period the 2007-2010.

Three performance indicators have been considered for this purpose namely Profitability, Liquidity & Soundness. This study covers a four year period from 2007 to 2010.Based on the performance of 2007 the impact has been analyzed by using financial ratios as analysis tool. The financial ratios like Return on Assets (ROA), Return on Equity (ROE), Loan to Asset Ratio(LAR), Loan to Deposit ratio (LDR), Assets Utilization(AU), Debt to Equity ratio(DER) and Income to Expense ratio(IER) are used to evaluate performance of sample banks. Primary data was also collected through survey by using a closed ended questionnaire.

The study explores two main findings (I) there seems no major variation in liquidity and profitability of both types of the commercial banks (II) the Islamic banks hold more liquid assets than conventional banking counterparts, which affected their liquidity.

While analyzing, it was also concluded that cost of deposit on conventional side increased as compared to Islamic Banking and Non Performing Loans were increased after multi year stability and control on healthy loans on conventional side.