Comparative Risk Return Analysis of Conventional and Islamic Banks in Pakistan

13 Pages Posted: 3 Apr 2014

See all articles by Muhammad Khalid

Muhammad Khalid

FAST School of Management, NUCES - ISB

Muhammad Hanif

National University of Computer and Emerging Sciences (NUCES or FAST-NU) - FAST School of Business

Date Written: April 1, 2014

Abstract

This study measures and compares the risk and return of the two banking streams i.e. the Conventional banking system and the Islamic banking system. Conventional banking system being the most dominating banking system has its strengths and in its competition Islamic banking has evolved and is in progress. The main difference between these two streams of banking is the main tool of functioning. Interest rate is the basic tool of functioning for conventional banks whereas interest being “Haram” in Islam the main tool of functioning in Islamic banking system is the profit and loss sharing. Owing to this basic and huge difference all the products and services offered differ in both systems. This creates a gap of relative performance, asking which system is working better or is more feasible. To cater to this gap I have studied the complete risk and return analysis of these banks using selected models available. The results of the study help the investor and customer to judge which stream is more feasible for them and also for the stake holders and potential investors and customers.

Keywords: Risk analysis, Return analysis, Comparative study, Islamic banking, Pakistani Banks, Bankruptcy, FX risk

Suggested Citation

Khalid, Muhammad and Hanif, Muhammad, Comparative Risk Return Analysis of Conventional and Islamic Banks in Pakistan (April 1, 2014). Available at SSRN: https://ssrn.com/abstract=2419326 or http://dx.doi.org/10.2139/ssrn.2419326

Muhammad Khalid (Contact Author)

FAST School of Management, NUCES - ISB ( email )

A.K. Brohi Road
Sector H-11/4
Islamabad, Punjab 44000
Pakistan

Muhammad Hanif

National University of Computer and Emerging Sciences (NUCES or FAST-NU) - FAST School of Business ( email )

A.K. Brohi Road
Sector H/11-4
Islamabad, 44000
Pakistan
+92 (051) 111 128 128 (Phone)

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