Profitability of Islamic banks verses conventional banks in Pakistan

Abstract

This research study analyzes the profitability of Islamic banks versus conventional banks in Pakistan from 2006 to 2020. The main objective of this study was to examine the profitability of three Islamic banks, Bankislami, Dubai Islamic Bank Ltd, and Meezaan Bank, whereas three conventional banks like Habib Bank Limited (HBL), Muslim Commercial Bank (MCB), United Bank Limited (UBL) in Pakistan from the year 2006 to 2020. This study investigates whether Islamic banks are performing well in Pakistan compared to conventional banks. Ratio analysis has been used to measure profitability, and two variables have been used, ROA and ROE, to measure the banking sector's profitability. The study concluded that Islamic banks were more profitable during the year 2007-2008 only while conventional banks were more profitable in the year from 2006- 2015 except 2008, in respect of ratio analysis, although in the year 2007-8 performance and profitability of Islamic banks are suitable according to the overall results conventional banks are more efficient and profitable than Islamic banks in Pakistan.