Superiority of Conventional Banks & Islamic Banks of Bangladesh: A Comparative Study

Abstract

The commercial banking system dominates the financial sector with limited role of non-bank financial institutions and the capital market. The Banking sector alone accounts for a substantial share of assets of the financial system. Commercial banks contribute significantly in the economic development through the development of major contributory economic indicators directly or indirectly. Commercial banks in Bangladesh operate under branding of interest-based conventional banks and interest-free Islamic banks (based on Islamic sariah).The study emphasis on the financial performance analysis of both stream of banks to measure superiority. The study indicates that financial performance (business developments, profitability, liquidity and solvency, commitment to economy and community, efficiency and productivity) of both streams of banks is notable. Study result based on commitment to economy & community, productivity and efficiency signifies that interest-based conventional banks are doing better performance than interest-free Islamic banks. But performance of interest-free Islamic banks in business development, profitability, liquidity and solvency is superior to that of interest-based conventional banks. That is comparatively Islamic banks are superior in financial performance to that of interest-based conventional banks.