Financial Stability of Islamic Banks verses Conventional Banks: An Empirical

Dr. Hassan Shakeel Shah; Sidra Ayoub; Dr. Tamsila Naeem

Authors

Dr. Hassan Shakeel Shah Associate Professor, Department of Islamic Thought and Civilization, University of Management and Technology, Lahore, Pakistan. He can be contacted
Sidra Ayoub MS Islamic Banking and Finance, Department of Banking and Finance, University of Management and Technology, Lahore, Pakistan.
Dr. Tamsila Naeem Assistant Professor, University of Management and Technology, Lahore, Pakistan.

Abstract

Purpose: Islamic banking is growing from the last decades. This is a study of the comparison about financial stability of the Islamic banks and conventional banks in Pakistan and Malaysia.

Findings: The overall finding of this research is that Islamic banks is financially stable than the conventional banks on the base of ratio and regression analysis. While the z- score analysis is described that the both sector of Pakistan is financially more stable than the both sectors of Malaysia.

Design / Methodology / Approach: In this research secondary data practice is used which contains panel data. Data is generated from annual reports and time series which is used in this paper is from 2011 to 2016. This study is adopted Z-score analysis, Liquidity ratio, and Credit risk ratio, loan to deposit ratio, to measure financial stability of Islamic banks and conventional banks. And regression analysis for the comparison of both sector of Pakistan and Malaysia.

Practical / Research Implications: This study will helpful for both institutions to find out the areas which needs more improvement. They can emphasis more on that sector by captivating affecting decisions. This will also help to identify which sector is best from both countries. The general public can also have a best image of financial stability of both institutions.

Originality / Value: Earlier it was exasperated to examine performance of both sectors in country wise like Malaysia, Indonesia etc. But this study is a pronounced contribution in research field to have a better evaluation among country wise. Particularly in Pakistan, and Malaysia which are the hub of Islamic banking.

Keywords: Islamic banking, Conventional banking, Financial Stability, Z-score.