Financial performance analysis of Islamic banks and conventional banks in Pakistan: A comparative study

The aim of this research work is to compare the financial performance of Islamic banking sector and conventional banking sector in Pakistan from year 2007-2011. The Islamic banking in Pakistan is new as compared to the conventional banking. Therefore, to give a clear picture of Islamic banks to the stakeholders, the financial position of Islamic banks has been analyzed and compared with that of well established conventional banks in Pakistan. To measure Performance, six ratios are developed. Financial ratio analysis has been conducted to test the ratios of eight sample banks. The results show that Islamic banks are less risky in terms of dealing in loans and less efficient in expense management as compared to the conventional banks. Whereas, no significant difference has been found in the profitability of both the banking sectors. Overall, Islamic banks’ performance has found satisfactory.