Presentation

On
Comparison Between Islamic
Banks And Conventional Banks

Introduction
Background of the study Objective
A bank is an economic institution whose main aim is to earn
profit through exchange of money & credit instruments. It is
service oriented as well as profit oriented organization.
Islamic bank works under the Islamic Shariah rules. Shariah
rules basically follow the partnership based banking where
conventional banks follow the interest based banking system.
The main difference between Islamic banks and conventional
banks is the exclusion of interest.

Objective of the study

The main objective of this study is to compare the performances
of Islamic banks with conventional banks in Bangladesh.
Specific objective1. Analysis of Investment
2. Analysis of Deposit
3. Analysis of Capital Adequacy Ratio
Data and Methodology
To prepare this paper main emphasize has been given on the
secondary data. Basically we used annual report data of sample
banks from year 2011-2015. And data also collected from
journal, article, newspaper and internet.

Overview of sample banks

Islamic Bank Bangladesh Ltd (IBBL)

IBBL was incorporated on 14th March, 1983, went into process on

30th March 1983 and introduced a full package of banking services
in August 1983. IBBL is considered to be the first interest-free bank
in South East Asia.
First Security Islamic Bank Ltd (FSIBL)
FSIBL was incorporated on 29th August 1999 as a limited company
and received authorization from Bangladesh Bank on 22nd
September 1999. The bank started operation as a commercial bank
from its former branch on 25th October 1999.FSIBL started its
voyage with a vision to develop itself as a modern Islamic bank and
to make effective involvement in the national economy.

Dutch Bangla Bank Ltd

DBBL started operation as Bangladesh's first joint venture bank. The

bank was an effort by local shareholders spearheaded by M
Sahabuddin Ahmed (founder chairman) and the Dutch company FMO.
DBBL was the first bank in Bangladesh to be fully automated. The
Electronic-Banking Division was established in 2002 to undertake
rapid automation and bring modern banking services into this field.
Full automation was completed in 2003 and hereby introduced plastic
money to the Bangladeshi people.
Prime Bank Ltd
Established in April 1995 by a group of visionary entrepreneurs, PBL
is known for its superior service quality, brand image, strong corporate
governance and corporate culture. PBL ranked 9th in the Dhaka Stock
Exchange (DSE) by market capitalization.

Findings and Analysis

Comparative analysis of investment of sample

banksTo make an experimental analysis on investment, five years comparative analysis is done
among two Islamic banks and two conventional banks on the basis of division wise, mode
wise and sector wise. These are briefly discussed below:-

Division wise investment of sample banks

600

Mymensingh

500

Rangpur
Sylhet

400

Barisal
300

Rajshahi

200

Khulna
Chittagong

100

Dhaka
0
IBBL

FSIBL

PBL

DBBL

This figure represent that IBBL invest highest in Dhaka division and PBL and DBBL make
highest investment in the same division. In contrast, FSIBL invest highest in Chittagong
division. Moreover, investment of these banks in other division is low as compared with the
Dhaka division and the Chittagong division.

Mode wise investment of sample banks

In mode wise investment, Bai-Murabaha captured the lion share of investment of Islamic
banks and then Bai-muajjal Captured the second position of investment. PBL invest highest in
secured loan and DBBL invest highest in cash credit.

Sector wise investment of sample banks

In sector wise investment, IBBL invest highest in trade and commerce sector and FSIBL invest
more on internal trade finance and special program sector. On the other side, PBL invest
highest in bill purchase and discounted and DBBL invest highest in commercial loan.

Comparative analysis of deposit of sample banks.

600
500
400
300

Term deposit
Savings deposit

200

Current deposit

100
0
IBBL

FSIBL

PBL

DBBL

This figure represent that IBBL has highest deposit in Savings Deposit and
FSIBL has highest deposit in Mudaraba Savings Deposit. On the other side,
PBL and DBBL contains highest amount of deposit in Term Deposit .

Comparative analysis of capital adequacy ratio of

sample banks.
16
14
12

2011

10

2012

2013
2014

2015

2015

2014

2013

0
IBBL

2012
FSIBL

PBL

2011
DBBL

This figure represent that IBBL has highest capital adequacy ratio in year 2014. FSIBL has
upward trend in capital adequacy ratio in year 2011-2015. On the other side, PBL represent
highest capital adequacy ratio in year 2015. And DBBL has highest capital adequacy ratio in
year 2015.

Conclusion and Recommendations

Conclusion
This study was basically based on the trends of investment, deposits and capital adequacy ratio of respective
Islamic banks and conventional banks in Bangladesh. This report presents that Islamic banks tried their best to
maintain Islamic Shariah but they faces many difficulties to keep up Islamic principles and conventional banks tried
to maintain their interest based banking principles. There are some issues related to the topic comparison between
Islamic banks and conventional banks, these are given belowIn division wise investment, most of the investments in Dhaka division and then Chittagong division compared to

other divisions. In Barisal division, Sylhet division and Mymensingh division contain small portion of investments.
In mode wise investment, IBBL and FSIBL invest highest in Bai-Murabaha is compared to others. In FSIBL

investment in Bai-Murabaha is decreasing in trend year. On the other hand, PBL invests highest in Secured loan
and DBBL has highest investment in Cash credit.
In sector wise investment, IBBL has highest investment in Trade and Commerce, FSIBL has highest investment in

Textile and Readymade garments. On the other hand, PBL has highest investment in Industrial loan and then
commercial loan, DBBL has highest investment in commercial loan and then Industrial loan compared to other
sector.
Islamic banks has largest portion of deposit in Mudaraba Savings Deposit and conventional banks has largest

portion of deposit in Term deposit compared to other deposit.

Recommendations
Both Islamic banks and conventional banks invest highest in Dhaka division and then
Chittagong division. So, every bank should invest more on the other divisions.
Islamic banks should invest more on Agriculture sector since our country is an
agricultural country. And Islamic banks also invest more on garments sector because this
is growing sector. Conventional banks should invest more on Industrial loan sector
because this sector covers most of the sectors in Bangladesh.
Islamic banks have more savings deposit, so they should try to increase their current
deposit and short notice deposit. Conventional banks have more fixed deposit than other
current deposit and savings deposit, so they should try to convince their customer to
increase their deposit.
All Islamic banks and conventional banks should try to increase their capital adequacy
ratio to improve their performance.
Finally, all of these banks should be careful about their investment sector.