A Comparative Study on the Performance between Selected Non-Government Commercial Islamic and Conventional Banks in Bangladesh

Commercial Banks are the major contributors to the financial market mechanism in Bangladesh. In terms of earnings based on religion, two types of commercial banking systems, Islamic banking and Conventional banking are functioning in Bangladesh. The systems differentiate each other according to their compliance with different norms, values, beliefs and religious views while conducting banking business. Islamic banks follow trading and investment mechanisms while Conventional banks follow borrowing and lending mechanisms. Islamic banks neither pay nor accept interest since it is prohibited in Islamic Principles. Rather Islamic Banks do business on profit and loss sharing concept. On the other hand, Conventional banks provide and receive interest while receiving deposits and providing loans respectively. This study is conducted to identify the better performing system and examine the reasons for the superior performance. This research uses Return on Equity (ROE), Return on Asset (ROA), and Earnings per Share (EPS) ratios and finds Total Deposit and Total Asset of the banks as tools for measuring the banking performance. Results show that although the Earnings per Share (EPS) and Total Assets of the Conventional banks are better than Islamic banks, ROE, ROA and Total Deposit of Islamic banks are better than Conventional banks. Aus. Aca. Acc & Fin. Rev Vol 2(2), Apr 2016, P 189-203