




































Indian Journal of Finance and Banking 

 Vol. 9, No. 1; 2022 

                                       ISSN 2574-6081   E-ISSN 2574-609X 

Published by CRIBFB, USA 

33 

DOES THE FINANCIAL PERFORMANCE OF ISLAMIC BANKS 

ARE HIGHER THAN THE TRADITIONAL BANKS IN 

BANGLADESH? PANEL DATA ANALYSIS 
 

Dr. Md. Abu Issa Gazi 

Associate Professor  

School of E-commerce 

Jiujiang University, Jiujiang, Jiangxi, China 

E-mail: maigazi@yahoo.com, dr.issa@jju.edu.cn   

https://orcid.org/0000-0002-1397-8855 

 Md. Aminuzzaman Talukder 

Associate Professor 

Department of Business Administration 

Khwaja Yunus Ali University, Enayetpur, Sirajgonj, Bangladesh 

E-mail: talukder.dba@kyau.edu.bd 

https://orcid.org/0000-0002-5173-7243 

 Md. Sazib Molla 

Assistant Professor 

Department of Business Administration 

The International University of Scholars, Bangladesh 

E-mail: sazib.ais.iu@gmail.com 

https://orcid.org/0000-0001-7156-6472 

Dr. Mobarak Hossain 

Assistant Professor 

Department of Business Administration 

Bangladesh Islami University, Bangladesh 

E-mail: mobarakru1987@gmail.com 

https://orcid.org/0000-0003-4514-1547 

Abu Ishaque Hossain    

Master of Business Administration (MBA-HRM) 

Department of Business Administration 

The International University of Scholars, Bangladesh 

E-mail: abuishaquehossain96@gmail.com 

https://orcid.org/0000-0002-0688-2329 

     

Received: October 20, 2021      Accepted: December 19, 2021       Online Published: January 17, 2022  

 

DOI: 10.46281/ijfb.v9i1.1549            URL: https://doi.org/10.46281/ijfb.v9i1.1549 

 

ABSTRACT 

This study aims to examine the comparative financial performance between traditional and Islamic 

banks in Bangladesh. The study used secondary data as panel data of banks for 2016-2020. Since the 

data is secondary, the quantitative approach to research is considered to use financial ratio analysis 

(FRA). For analyzing the panel data, Decision Analyst Stats 2.0 software was used. This study 

randomly selected 10 scheduled commercial banks where 5 traditional and 5 Islamic banks. The 

mailto:maigazi@yahoo.com
https://orcid.org/0000-0002-1397-8855
mailto:Email:%20talukder.dba@kyau.edu.bd
https://orcid.org/0000-0002-5173-7243
mailto:sazib.ais.iu@gmail.com
https://orcid.org/0000-0002-5173-7243
mailto:mobarakru1987@gmail.com
https://orcid.org/0000-0003-4514-1547
mailto:abuishaquehossain96@gmail.com


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34  

results found that the financial performance of Islamic banks and traditional banks is satisfactory but 

more satisfactory in the case of Islamic banks in Bangladesh. The study also found that profitability 

has increased significantly in the banking sector in the last five years. Based on empirical findings, 

financial performance indicators significantly affect the financial performance of the baking sector; 

that’s why policymakers should care about financial performance determining factors and focus on 

rapid economic growth with risk recovery techniques. The present study is a small attempt to 

understand the current financial performance of Islamic Banks and Traditional Banks. The findings 

help the researchers and all parties involved in the banking system understand profitability and its 

role. 
 

Keywords: Islamic Banks, Traditional Banks, Financial Performance, Panel Data, Ratio. 
 

JEL Classification Codes: F62, G21, G200, G210, G240.  

 

INTRODUCTION 

The banking system of Bangladesh has a strong economic foundation. The banking system, which 

contributes to the economy of Bangladesh, has been providing various benefits to customers for over 

50 years. We know a bank is a financial institution playing a vital role in the economic growth and 

development of any country (Belkhaoui et al., 2020; Mustafa, 2019; Baeshen and Shaheen, 2021). The 

economy's strength is closely linked to the soundness of a country's banking system (Ledhem & 

Mekidiche, 2020). Without an effective banking system, the current business and economics cannot be 

run smoothly as it is considered one of the most important modern service industries in the world. In 

this competitive environment in today's world, banks increase their facilities in favor of their 

customers to retain them and capture more market share to be a leader. Competition is increasing day 

by day. The banking sector needs to be dynamic with continuous development in a highly competitive 

environment (Rahaman et al., 2020). Sixty-one scheduled banks in Bangladesh are functioning very 

efficaciously. Their current performance and financial situation are quite satisfactory. Right now in 

Bangladesh, Banks’ have four divisions, namely, State-owned Commercial Banks (6) and Private 

Commercial Banks (43=conventional bank 33+Islami Shariah-based bank 10), foreign commercial 

banks (9), and 9 specialized banks (Bangladesh Bank, 2021). 

Along with the traditional banking system of Bangladesh, the Islamic banking system has 

reached a strong position. Islamic banking system opened new horizons in the banking system of this 

country in the eighties. Islamic banking has strengthened the economy of Bangladesh side by side with 

traditional banks. At present, the development of the Islamic banking industry cannot be repudiated, 

which is growing at least 5% annually (S&P Global Rating, 2020). The Islamic banking system has 

gained the trust of millions of customers (Majeed & Zainab, 2021). In this Muslim-majority country 

Bangladesh, where traditional and Islamic banking systems go hand in hand, a different kind of trust 

and confidence has been created in the Islamic banking system (Berger et al., 2019). There is fierce 

competition between Islamic and traditional banking systems. In the competition race, Islamic banks 

are moving against the traditional banks visible in their profit margins. In 1983, Islami Bank 

Bangladesh (IBBL) set a milestone in the Islamic banking system by launching Shariah-based banking 

activities (Islam et al., 2019). Subsequently, ten Islamic shariah base banks have been established one 

after another due to the success of Islami Bank Bangladesh Limited (IBBL). The banking sector 

contributes more to the economic development of Bangladesh. Bangladesh's banks are now stable and 

significantly influence the national economy. We attempt to examine both banks' present progress and 

financial situation in Bangladesh. For this purpose, we analyzed financial performance to find which 

one is better in position. Therefore, this research will be helpful to depositors and investors to make 

well-timed decisions concerning investment and fundraising. It directs bank managers to increase the 

eminence of both financial and deposit services. Ultimately, the results of this study also help financial 

policymakers and the regulatory author of the banking sector to make accurate decisions. 

 

 



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35  

LITERATURE REVIEW 

The bank is a financial institution that is working as the most important organ of the economic growth 

and development of any country. Banks provide financial security by accepting customer savings, 

creating high employment opportunities through investment and playing a role in alleviating poverty. 

Similarly, the economic development of a country also depends on the performance of the banking 

industry. Researchers have taken the issue of the financial banking industry’s financial performance 

very seriously. Many previous studies have evaluated comparative financial performance between 

traditional and Islamic banks.  

The literature reveals that numerous studies have scrutinized the financial performance of 

Islamic banks and Traditional banks and found mixed results (Mustafa, 2019; Safiullah & Shamsuddin, 

2019; Hassan et al., 2019; Komijani & Hesary, 2018; Zahid et al., 2016). For instance, Majeed and 

Zainab (2021) analyzed traditional and Islamic banks' financial performance using financial ratio 

analysis (FRA). The finding shows that Islamic banks are better capitalized, have higher liquidity and 

are less risky than conventional banks. Still, the profit earnings ratio of Islamic banks is lower than 

conventional banks. Uddin, Ahsan, and Haque (2017) studied on comparison of financial performance 

of Islamic banks and conventional banks in Bangladesh during 2010-2014 by analyzing CAMEL tests. 

They didn't find any difference between Islamic banks and conventional banks in financial 

performance. They also noticed that traditional banks' assets quality and management quality are better 

than Islamic banks. Saeed et al. (2013) conducted a study on comparative financial performance 

between Islamic banks and traditional banks in Pakistan during 2007-2011 by using Data Envelopment 

Analysis (DEA) and financial ratio analysis (FRA) methods to analyze data. They found from their 

study that conventional banks are more competent than Islamic banks. Kakakhelet et al. (2013) found 

that Islamic banks have a better financial position, especially better in cash and assets turnover than 

conventional banks but less profitable than traditional banks. 

On the other hand, Majeed and Zanib (2016) revealed that Islamic banks are highly profitable 

and proficient. Kias and Ramlan (2016) studied the profitability of Islamic banks and conventional 

banks in Malaysia, studied period used data from 2006 to 2011. He used a linear regression test to find 

results. He found that conventional banks are less profitable than Islamic banks, whereas the total loan 

to total assets is higher than conventional banks. Najjar (2012) studied the financial performance of 

traditional and Islamic banks in Bahrain by using financial ratio analysis (FRA) and found that Islamic 

banks’ financial strength is better than traditional banks. Milhem and Istaiteyeh (2015) also analyzed 

financial performance through ratio analysis and concluded that effective asset management, effective 

liquidity rates and high profitability of Islamic banks than traditional banks. Ibrahim (2015) studied the 

financial performance of two UAE-based Islamic and conventional banks during 2000-2006. The 

findings showed that Islamic banks are more profitable than conventional banks, but there are 

significant differences between the two banks. Jubilee et al. (2021) assessed the differences between 

Islamic and conventional banks’ productivity in the context of Asian countries by applying DEA-

based MPI panel data methodologies. They found that Islamic banks are more productive than 

conventional banks but not statistically significant. Rodoni et al. (2017) analyzed a comparison of the 

productivity and efficiency of the 30 Islamic banks during 2009-2013 in Pakistan, Indonesia and 

Malaysia using MPI and DEA data analyzing methods. They found Islamic Islamic banks of Malaysia 

more productive than others countries. Kamarudin et al. (2017) studied 21 Islamic banks belonging to 

Malaysia and Indonesia using the MPI panel data method during 2006-2014. They found statistical 

significant of profitability better than banks of Malaysia and Indonesia. Habib (2018) found a significant 

difference between Islamic banks and conventional banks and noted that the profitability of Islamic banks is 

better than conventional banks in developing countries and developed countries using panel data  DEA and MPI 

techniques during 2013–2015 for G20 countries. Qureshi and Abbasb (2019) studied 15 traditional banks 

and two pure Islamic banks in Malaysia using CAMEL ratio analysis during 2010-2017. They found 

that the financial performance of Islamic banks is more satisfied than traditional banks. Aljahdali and 

Faleel (2021) argued that Islamic banks are less profitable but more liquid, less risky and more 

efficient than traditional banks. They concluded this by analyzing 3 Islamic banks and 3 traditional 

banks using t-test to determine the significance between the two groups. 



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36  

Thus, we propose the following hypothesis; 

 

H1. There is no difference between Islamic banks and traditional banks relating to financial 

performance.  

 

Based on previous studies, we can be said that many studies have been conducted on traditional banks 

relating to the financial performance in the world and Bangladesh. Although there is some research on 

the financial performance of Islamic banks separately, the number of comparative studies is less. Most 

of the studies have documented different and mixed results. There is little evidence to suggest that 

both Islamic banks and traditional banks have had productive levels in Bangladesh. So based on the 

previous studies gap, the purpose of the present study is to provide comparative empirical evidence of 

two different banking sectors (Islamic and Traditional) 

 

METHOD 

Sample Selection 

Except for Bangladesh bank itself, there are 60 scheduled banks among these 43 private commercial 

banks and 6 state-owned commercial banks providing banking services in Bangladesh (Bangladesh 

Bank, 2021). This study considered 10 banks as a sample among the private banks by selecting 5 

Islamic banks and 5 traditional banks randomly. The following Islamic and traditional banks 

 

Islamic banks Traditional banks 

Islami Bank of Bangladesh Limited(IBBL) Prime Bank Limited (PBL) 

Social Islami Bank Limited(SIBL) Mercantile Bank Limited(MBL) 

Shahjalal Islami Bank Limited (SJIBL) Dutch Bangla Bank Limited (DBBL) 

Al-Arafah Islami Bank (AAIB) Bank Asia Limited(BAL) 

First Security Islami Bank Limited(FSIBL) National Bank Limited (NBL 

 

The sample banks cover only private banks, which occupy 90% of the banking sector of Bangladesh.   

 

Variables Covered 

Financial ratios are used to measure capital adequacy (CA), asset quality (AQ), management 

efficiency (ME), profitability (P), liquidity efficiency (LE), which are the independent variables of this 

study. On the other hand, financial performance is considered a dependent variable of the current study. 

 

Data Analysis, Instruments and Measurements 
Various financial and accounting ratios have been used for performance analysis, such as Capital 

Adequacy Ratio CAR), Asset Quality Ratio (AQR), Management Efficiency Ratio (MER), Liquidity 

Ratio (LR) and Profit Ratio (PR). Profit ratio includes ROR, ROE and EPS-Earning per Share. The 

present study used a very well-known bank’s financial ratio calculation method. Cole (1972) first 

introduced these ratios to calculate the bank’s financial performance. Many researchers have used this 

method for similar objectives, i.e., Narayan and Phan (2019); Mukhibad and Kafid (2018); Shawtari et 

al. (2018); and Bitar et al. (2019). In addition to measuring the performance of concerned banks, 

different descriptive statistical tools have been used in this study. The FRA model of Panel data has 

been used to determine a bank’s financial performance. The study used panel data analysis software 

and Decision Analyst Stats 2.0 for analyzing the data. 

 

http://en.wikipedia.org/w/index.php?title=Islami_Bank_of_Bangladesh_Limited&action=edit&redlink=1


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Theoretical Framework of the Research  

 

                            

 

 

 

 

 

 

Figure 1. Theoretical framework 

 

ANALYSIS AND RESULTS 

Profitability  

Return on Assets (ROA) 

 Table 1. Return on Assets (ROA) 

 

Table 1 shows the calculation of ROA. Among the Islamic banks and conventional banks, 

Islamic Banks' position is strong; Islamic Banks' average growth in ROA is better than conventional 

banks. The average growth of ROA for Islamic Bank and the traditional bank is 16.79% and 10.27%, 

respectively. Individually, FISBL is in a better position among the banks; it is also observed that all 

Islamic banks' performance is good and gained optimum growth rate. The table reveals a significant 

difference between Islamic banks and traditional banks based on ROA. 

 

 

Capital Adequacy 

Asset Quality 

Profitability 

Liquidity Ratio 

Management 

Efficiency 

Name of the 

banks 

2016 2017 2018 2019 2020 Average 

Growth (%) 

Mean Z 

value 

P 

IBBL 0.88 1.28 1.44 1.37 1.45   

 

 

 

16.79% 

 

 

 

 

 

 

 

 

1.054 

 

 

 

 

 

 

 

 

0.000 

 

Growth (%) - 52.19 6.51 6.29 -9.16 12.17 

SIBL 0.77 1.56 1.31 1.45 1.22  

Growth (%) - 32.28 23.58 14.28 31.77 9.45 

AAIBL 1.18 1.60 1.79 3.65 3.06  

Growth (%) - 56.52 -1.66 44.63 -22.26 15.45 

SJIBL 2.60 2.26 2.08 3.01 1.26  

Growth (%) - -13.07 -7.96 44.71 -58.13 -6.89 

FSIBL 0.55 0.66 1.78 1.97 2.78  

Growth (%) - 30.50 144.85 22.17 -8.02 28.85 

PBL 2.02 1.70 3.07 1.88 2.82   

 

 

10.27% 

Growth (%) - 1.25 1.78 2.06 1.05 1.58 

DBBL 1.32 2.06 2.74 1.87 2.02  

Growth (%) - 28.45 7.02 4.14 14.87 13.54 

MBL 1.52 1.87 0.99 2.04 1.89  

Growth (%) - 1.58 11.04 35.87 0.03 4.58 

BAL 3.01 1.99 3.24 1.44 1.45  

Growth (%) - -12.02 17.54 2.05 -18.97 2.99 

NBL 1.40 2.98 1.54 7.48 5.02  

Growth (%) - 0.04 5.88 29.54 25.87 21.84 

Ratio Analysis Performance    

Islamic Banks  

Traditional Banks  



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Return on Equity (ROE) 

Table 2. Return on Equity (ROE) 

Name of 

the banks 

2016 2017 2018 2019 2020 Average Growth 

(%) 

Mean Z  

value 

P 

IBBL 14 19.02 16.93 19.00 17.42   

 

 

 

2.99% 

 

 

 

 

 

 

0.158 

 

 

 

 

 

 

NS 

Growth (%) - 46.30 -10.99 12.22 -8.31 8.85 

SIBL 19 22.15 19.32 18.87 15.69  

Growth (%) - 48.21 21.75 12.35 1354 7.78 

AAIBL 16.05 24.70 24.10 20.01 18.34  

Growth (%) - 44.87 -2.43 -16.97 -8.34 4.46 

SJIBL 24.21 25.58 25.10 30.71 13.18  

Growth (%) - 10.21 -1.88 22.35 -57.08 -5.50 

FSIBL 1.47 0.61 1.56 1.89 1.75  

Growth (%) - 29.78 155.73 21.15 -7.40 38.48 

PBL 32.68 20.58 30.19 32.12 19.61   

 

 

 

2.14% 

Growth (%) - 1.08 38.45 7.87 -8.49 1.25 

DBBL 24.59 30.87 29.47 33.54 32.84  

Growth (%) - 1.54 3.64 7.81 -7.57 -4.99 

MBL 18.54 16.78 19.85 18.96 18.02  

Growth (%) - 0.05 6.02 4.98 0.81 1.02 

BAL 34.25 22.88 31.89 34.65 20.74  

Growth (%) - -28.02 40.25 1.25 -25.74 -4.85 

NBL 31.85 29.67 28.12 50.12 30.84  

Growth (%) - 1.52 5.45 66.45 37.88 23.83 

 

Table 2 shows that the average growth rate of ROE is higher for the Islamic banks; most of the 

Islamic banks’ financial position based on ROE is good enough than conventional banks. The mean 

value of Islamic banks is 2.99, whereas the mean value of traditional banks is 2.14. The results reveal 

that the financial performance of Islamic banks is better than traditional banks but not significant.   

Earnings per Share  

Table 3 indicates that the average growth rate of Earning per Share of Islamic banks is 7.80%. In 

contrast, traditional banks have 5.69%, which means that the financial performance of Islamic banks 

calculated good in position, particularly the financial performance of Islamic banks are calculated 

higher in position rather than a traditional one, earning per share of IBBL, SIBL, AAIBL SJIBL and 

FSIBL of all Islamic banks looks great based on growth rate. Finally, the table-3 reveals that the 

financial performance based on earnings per share of Islamic banks is higher than traditional banks but 

not statistically significant. 

 

Table 3. Earnings per Share 

 
Name of the 

banks 

2016 2017 2018 2019 2020 Average Growth  

   (%) 

Mean Z value P 

IBBL 3.87 3.99 5.48 5.02 3.89   

 

 

7.80% 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Growth (%) - 45.58 5.85 -2.80 9.25 19.54 

SIBL 17.82 16.48 17.85 3.28 2.05  

Growth (%) - 0.08 7.64 0.99 2.18 16.33 

AAIBL 3.54 4.85 1.89 3.87 4.68  

Growth (%) - 47.98 2.88 10.87 8.94 22.56 

SJIBL 4.23 4.55 3.99 4.75 3.84  

Growth (%) - 38.45 8.21 2.75 6.14 10.58 

FSIBL 3.50 7.35 1.42 1.61 1.71  



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39  

Growth (%) - 129.68 -80.68 13.38 6.21 12.45  

1.28 

 

NS PBL 5.87 3.88 8.45 4.87 5.90   

 

 

 

5.69% 

Growth (%) - -29.70 80.83 -27.33 -17.39 2.85 

DBBL 23.58 6.02 6.12 9.87 11.25  

Growth (%) - -55.54 4.58 71.89 7.45 2.99 

MBL 30.86 27.87 31.57 42.85 33.99  

Growth (%) - 0.52 8.21 33.87 0.05 4.33 

BAL 49.54 38.45 58.67 62.82 35.88  

Growth (%) - 0.06 55.63 3.78 4.58 2.74 

NBL 6.21 8.54 6.24 8.54 6.85  

Growth (%) - 32.85 0.64 52.47 11.7 12.78 

Capital Adequacy Ratio 

Table 4. Capital Adequacy Ratio  

 
Banks 2016 2017 2018 2019 2020 Mean Sample Industry 

Average 

Z value P 

IBBL 11.61% 12.72% 12.65% 13.06% 14.09% 13.43%  

11.63% 

 

 

0.89 

 

 

NS 
SIBL 9.71% 11.87% 15.97% 9.88% 14.27% 10.82% 

AAIBL 12.92% 11.21% 11.25% 14.49% 13.47% 12.27% 

SJIBL 15.42% 13.81% 13.98% 10.08% 11.14% 13.09% 

FSIBL 10.15% 9.15% 10.91% 9.09% 9% 9.46% 

PBL 12.50% 10.88% 14.71% 11.69% 12.49% 11.25%  

11.45% DBBL 10.8% 10.9% 11.6% 9.6% 11.2% 9.02% 

MBL 12.67% 10.17% 10.48% 9.13% 10.60% 10.41% 

BAL 13.88% 8.11% 12.27% 11.25% 11.28% 10.56% 

NBL 14.11% 13.42% 8.61% 12.29% 12.65% 12.02% 

 

From table 4, it is clear that the capital adequacy ratio of Islamic Bank Bangladesh (IBBL) is 

higher among the two categories bank of 13.43% and the average capital adequacy ratio of SIBL, 

AAIBL, SJIBL and FSIBL is 10.82%, 12027%, 13.09% and 9.46% respectively. On the other hand, 

the average capital adequacy ratio is highest for NBL from traditional banks group. It is observed from 

Table 4 that the capital adequacy ratio of the Islamic Banking sector is quite better than the traditional 

banking sector but not significant.  

 

Asset Quality 
Table 5. Assets quality  

 
Banks 16 2017 2018 2019 2020 Mean Sample Industry Average Z value P 

IBBL 2.83% 2.79% 2.36% 1.67% 2.21% 2.83%  

3.78% 

 

 

 

1.258 

 

 

 

NS 

SIBL 5.93% 4.68% 3.29% 4.26% 2.93% 3.18% 

AAIBL 4.72% 2.25% 1.60% 1.24% 0.85% 2.05% 

SJIBL 0.72% 1.44% 0.84% 1.44% 1.62% 1.61% 

FSIBL 2.52% 1.25% 2.14% 1.87% 2.47% 3.2% 

PBL 2.11% 1.82% 0.99% 1.25% 1.52% 1.42%  

2.68% DBBL 5.02% 2.98% 1.98% 3.01% 2.65% 3.21% 

MBL 1.95% 2.02% 2.82% 1.87% 3.40% 2.06% 

BAL 2.05% 2.38% 2.27% 3.07% 1.86% 2.82% 

NBL 4.85% 6.20% 6.08% 4.52% 1.78% 3.56% 

 



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Table 5 shows that Islamic and traditional banks' asset quality is different. But calculated 

shows that Islamic banks’ asset quality is better than traditional banks based on the mean value of 

asset quality. The average growth rate of Islamic banks is 3.78% and for traditional banks is 2.68% but 

statistically not significant. If we see all banks individually, most of the Islamic banks' asset quality 

position is better than traditional banks. Alternatively, the asset quality of traditional banks is also 

good in Bangladesh.  

Liquidity Ratio 

Loan to Deposits 

Table 6.   Loan to Deposits 

 

It is observed from table-6 that the loan to deposit ratio for Islamic banks and traditional banks 

is different based on sample industry average values that are 11.82% and 10.77%, respectively. The 

calculation value of Islamic banks is higher than that of traditional banks. Individually, IBBL, SIBL, 

DBBL and MBL are first, second, third and fourth, respectively, based on Mean values (0.78, 0.63, 

0.56 and 0.44). Table-6 reveals that loan to deposit as a determinant of financial performance is better 

for Islamic banks than traditional banks but not a significant difference. 

  

Net Loans to Total Assets 

Table 7. Net Loans to Total Assets 

Bank 

name 

2016 2017 2018 2019 2020 Mean Sample 

Industry average 

Z value P 

IBBL 0.82 0.88 0.93 0.47 0.82 0.81  

 

83.12% 

 

 

 

 

1.921 

 

 

 

 

NS 

SIBL 0.72 0.65 0.72 0.67 0.76 0.73 
AAIBL 0.77 0.66 0.52 0.46 0.64 0.68 
SJIBL 0.71 0.68 0.72 0.73 0.64 0.59 
FSIBL 0.55 0.54 0.51 0.46 0.51 0.52 
PBL 0.58 0.82 0.14 0.48 0.64 0.71  

 

72.78% 

DBBL 0.73 0.72 0.73 0.71 0.72 0.72 
MBL 0.72 0.74 0.74 0.76 0.74 0.74 
BAL 0.71 0.67 0.70 0.74 0.69 0.70 
NBL 0.69 0.75 0.71 0.75 0.67 0.71 

Table 7 shows the Islamic and traditional banks’ net loan to total assets ratios. NLAR is good 

for Islamic banks than others. The mean value of Islamic banks is 83.12%, and the mean value of 

traditional banks is 72.78%. It is observed that among the Islamic banks. The net loan to total assets 

ratio is highest for IBBL and lowest for FSIBL. Results reveal a difference between traditional and 

Bank 

name 

2016 2017 2018 2019 2020 Mean Sample 

Industry  Average 

Z value P 

IBBL 0.29 0.78 0.42 0.52 0.44 0.78  

 

11.82% 

 

 

 

 

 

 

 

1.058 

 

 

 

 

 

NS 

SIBL 0.15 0.14 0.08 0.06 0.09 0.63 
AAIBL 0.08 0.85 0.64 0.65 0.08 0.09 
SJIBL 0.71 0.45 0.09 0.06 0.06 0.08 
FSIBL 0.21 0.19 0.22 0.11 0.12 0.18 
PBL 0.19 0.21 0.09 0.08 0.07 0.15  

 

10.77% 

DBBL 0.44 0.54 0.57 0.45 0.08 0.56 
MBL 0.32 0.25 0.34 0.63 0.43 0.44 
BAL 0.45 0.34 0.06 0.04 0.64 0.39 
NBL 0.32 0.57 0.04 0.06 0.91 0.19 



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41  

Islamic banks but are statistically insignificant. 

Management Efficiency 

Tax Management Efficiency  

Table 8. Tax Management Efficiency 

 
Bank 

name 

2016 2017 2018 2019 2020 Mean Sample 

Industry average 

Z value P 

IBBL 0.47 0.52 0.42 0.65 0.57 0.562  

55.62% 

 

 

 

 

0.081 

 

 

 

 

NS 

SIBL 0.25 0.81 1.21 0.87 0.12 0.331 

AAIBL 0.08 0.53 0.54 0.68 0.56 0.478 

SJIBL 0.53 0.52 0.60 0.70 0.50 0.566 

FSIBL 0.52 0.55 0.50 0.55 0.47 0.518 

PBL 0.59 0.50 0.60 0.55 0.53 0.554  

53.82% DBBL 0.46 0.46 0.53 0.54 0.47 0.492 

MBL 0.45 0.39 0.48 0.58 0.57 0.494 

BAL 0.56 0.54 0.58 0.48 0.53 0.538 

NBL 0.41 0.21 0.45 0.49 0.71 0.74 

Table 8 found that Islamic banks' Average Tax Management Efficiency is improved than 

conventional banks; values are 55.62% and 53.82 %, respectively. Both categories of banks’ have 

good tax management efficiency. Among the Islamic banks, SJIBL and IBBL have the better position 

and gained 1st and 2nd position. PBL and BAL gained the first and second positions among the 

traditional banks, respectively. Islamic banks’ tax management efficiency is better than traditional 

banks; Statistical value shows no significant difference between these two groups of banks.  

Expense Control Efficiency 

Table 9. Expense Control Efficiency 

Bank name 2016 2017 2018 2019 2020 Average of sample 

bank 

Mean Z value P 

IBBL 1.88 0.89 0.99 0.88 0.98 1.88  

 

96.9% 

 

 

 

 

 

 

1.054 

 

 

 

 

 

000 

SIBL 0.72 0.64 0.87 0.91 0.91 1.81 
AAIBL 0.86 0.81 0.87 0.85 0.86 1.85 
SJIBL 1.23 1.08 1.43 1.16 1.32 1.24 
FSIBL 0.25 0.72 0.75 0.25 0.43 1.54 
PBL 0.45 0.65 0.45 0.63 0.62 0.55  

 

88.6% 

DBBL 0.82 0.45 0.14 0.24 0.62 0.85 
MBL 0.75 0.48 1.25 1.28 0.64 1.68  
BAL 0.58 0.64 0.74 0.52 0.65 1.02 

NBL 0.41 0.44 0.87 0.52 0.45 0.82 

 

From Table 9, we see that Islamic banks' Average Expense Control Efficiency is better than 

traditional banks. The mean value of the Islamic bank group is 96.9%, and traditional banks are 88.6%, 

respectively. It is also observed that IBBL, AAIBL and SIBL gained 1st and 2nd and 3rd position among 

the Islamic banks, respectively. Also observed among the traditional banks MBL, BAL and DBBL 

gained 1st and 2nd and 3rd position respectively. Result reveals from table-9 that there is a significant 

difference between Islamic banks and traditional banks in the case of Average Expense Control 

Efficiency. 

 

 

 



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Fund Management Efficiency 

Table 10. Fund Management efficiency 

 

Bank 

name 

2016 2017 2018 2019 2020 Mean Sample 

Industry average 

Z value P 

IBBL 17.85 16.24 13.47 15.87 14.14 18.24  

 

18.54 

 

 

 

 

1.054 

 

 

 

 

NS 

SIBL 12.74 17.96 12.22 13.13 9.96 13.45 
AAIBL 15.83 13.78 12.65 6.89 7.98 12.85 
SJIBL 11.14 14.28 12.65 11.12 14.02 13.14 
FSIBL 23.75 12.30 16.74 16.22 20.00 15.88 
PBL 15.09 16.49 10.62 9.12 10.44 12.38  

 

16.87 

DBBL 21.14 19.16 18.79 14.45 13.79 17.55 
MBL 15.34 16.11 15.40 12.12 12.06 15.58 
BAL 44.62 31.56 13.85 7.56 3.08 21.54 
NBL 12.37 11.78 10.30 7.05 7.85 9.87 

 

Table 10 shows that Islamic banks’ fund management efficiency is better than traditional banks; 

the mean value of Islamic banks and traditional banks is 18.54% and 16.87%, respectively. It is 

observed from table-10 that according to the fund management efficiency ratio IBBL is best from the 

Islamic bank's group, and BAL is the best from traditional banks group. There is a difference between 

Islamic banks and traditional banks’ financial performance based on Fund Management Efficiency but 

not significant. 

 

DISCUSSION 

The study results prove that Islamic banks’ financial performance undoubtedly is higher and 

progressive than conventional banks. The growth of the Return on Assets (ROA) position and the 

growth of Islamic banks' Return on Equity (ROE) position are better than traditional banks. There is a 

significant difference between the Islamic banking sector and the traditional banking system in the 

case of ROA (table 1) but not significant in the case of ROE (table 2). The results demonstrate (Table 

3) Earning per Share ratio of Islamic banks is more than the traditional banks. Islami Bank Bangladesh 

Limited (IBBL) has a strong position among the studied banks. 

On the other hand, the position of traditional banks is also well in the case of Earning per Share 

Ratio. Several studies, e. g. Mustafa (2019), Habib (2018), and Jubilee et al. (2021) confirmed the 

same outcomes of the present study. The null hypothesis (H1) is not accepted. Furthermore, in terms 

of the highest position of Capital Adequacy and Asset quality, the Islamic banks' sector is diminutive 

healthier than the customary banking sector; the study observed that there is a difference but not 

significant (table 4 and 5). Few studies have proved the similar result like Islam et al. (2019); 

Komijani and  Hesary (2018); Majeed and Zainab (2021),  liquidity ratio of net loans to total assets 

and the loan to deposits of both banking sector good in position but statistically not significant (table 6 

and 7). Several researchers found the same findings (Ledhem & Mekidiche, 2020; Daoud and 

Kammoun, 2017). Some studies found a significant difference between the Islamic banking system 

and traditional banking system in the case of management efficiency of banks, i.e., Akram and 

Rahman (2018); Alsartawi (2019). It is observed that tax management efficiency, expense control 

efficiency and fund management efficiency of the Islamic banking sector are higher than the 

traditional banking sector. There is also a significant difference between both banking sectors in the 

case of expense control efficiency (table 9). Still, there is no significant difference in tax management 

efficiency (table 8) and fund management efficiency (table 10). Arising from the findings, we can 

reject the null hypothesis (H2) of there is no difference between Islamic banks and traditional banks 

relating to financial performance in Bangladesh. 

 

 



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CONCLUSION 
The banking sector of Bangladesh is playing a key role in economic prosperity. Traditional and 

Islamic banks have already been able to earn the trust of their clients by providing timely services 

together. It has become a partner in the economic development of Bangladesh, not as a rival but as a 

helper. As a Muslim-majority country, Islamic banks are not enjoying additional benefits, but in some 

cases, progress is being hampered by shariah-compliant formalities. Since Bangladesh is a Muslim-

majority country, the entire financial system is not run according to Islamic shariah. 

Similarly, the banking sector is not based on Islamic shariah as an integral part of the economy. 

For all these reasons, the Islamic banking sector has not achieved the desired success, and the number 

of Islamic banks is insufficient. In addition, the success of Islamic banks is enviable despite the 

unfavorable environment of the Islamic banking system. Research has shown that Islamic banks are 

ahead in the indicators of financial performance appraisal like profitability, management efficiency, 

asset quality, liquidity position, and capital adequacy look good in the Islamic banking sector that is 

slightly absent in the traditional banking sector. It is necessary to take all indispensable steps to make 

the Islamic banking system uninterrupted; Above all, it is time to formulate more research base 

policies to modernize the banking system of Bangladesh. It is hoped that the results and findings of the 

present study will benefit all parties involved in the banking sector. Every study has some limitations, 

and the present study is not out of it. Future researchers have the opportunity to research financial 

performance analysis of both banking sectors comparatively by taking more sample size and financial 

performance indicators related variables. 

                                                           

                                                            AUTHOR CONTRIBUTIONS 
Conceptualization: Md. Abu Issa Gazi, Md. Aminuzzaman Talukder 

Data Curation: Abu Ishaque Hossain, Md. Sazib Molla 

Formal Analysis: Md. Aminuzzaman Talukder, Mobarak Hossain 

Funding Acquisition: Md. Aminuzzaman Talukder, Mobarak Hossain 

Investigation: Md. Aminuzzaman Talukder, Mobarak Hossain 

Methodology: Md. Aminuzzaman Talukder, Mobarak Hossain 

Project Administration: Md. Abu Issa Gazi 

Resources: Md. Aminuzzaman Talukder, Mobarak Hossain 

Software: Md. Abu Issa Gazi, Md. Sazib Molla 

Supervision: Md. Abu Issa Gazi 

Validation: Md. Aminuzzaman Talukder, Md. Abu Issa Gazi 

Visualization: Md. Abu Issa Gazi 

Writing – Original Draft: Md. Abu Issa Gazi 

Writing – Review & Editing: Mobarak Hossain, Abu Ishaque Hossain, Md. Sazib Molla 

 

CONFLICT OF INTEREST STATEMENT 

The authors declare that they have no competing interests.  

 

ACKNOWLEDGMENTS 
All authors contributed equally to the conception and design of the study. 

 

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