How Shariah Compliance and Traditional Banks Are Performing? A Case of Pakistan

Abstract

The study is conducted with the objective of comparing shariah compliance and traditional banks of Pakistan from performance perspective. The relative investigations are conducted by means of t-test, for the period 2010-2017. Ratios based on CAMEL approach are applied to identify the managerial and financial performance of shariah compliance and traditional banks of Pakistan. It is observed that Shariah compliance banks are significantly better in managing capital appropriacy, managerial competency, earning quality and liquidity as compared to their traditional counterparts. The findings reveal significant implications for policy makers in assessing the capabilities of Shariah compliance and traditional banks in Pakistan, and for ascertaining the direction of future banking system in Pakistan. Findings of the study also underpin awareness and trust in Shariah compliance banks of Pakistan. Furthermore, according to authors information, there is no comprehensive research in Pakistan that differentiate the performance of Shariah compliance and traditional banks by applying CAMEL approach on variables under study as well as on current data set.