The comparative performance of Islamic and conventional banks: a meta-analysis

Abstract

To date, several studies have been devoted to comparatively examine the performance of Islamic banks to its conventional counterparts with mixed results. Given these inconclusive findings, the purpose of the study is to systematically review 73 samples of past journals and published thesis related to the performance of Islamic and conventional banks subject to regional and period of study. The results reported from past studies are systematically analysed using meta-analysis approach to effectively estimate the size of effect of the implementation of Islamic banking system to the overall performance of Islamic banks relative to conventional banks. Based on meta-analysis, in overall, there is no significant difference of performance between Islamic and conventional banks. In term of regional aspect, Pakistan, Bangladesh and Malaysia showcase better performance of Islamic banks in comparison to conventional banks. Further, Islamic banks perform better during short-term period while long-term studies show the domination of conventional banks. From policy implication, this study suggests that Islamic banks can perform better than its counterparts in a region that has strong government initiatives and community awareness in Islamic finance.