The Effects Of The Global Crisis On Islamic And Conventional Banks In Malaysia, A Comparative Study
by Khaled Husen M.ararieen
This research attempted to study the impacts of the 2008 Global Financial C on banking sector in Malaysia and compare these effects and impacts between Islamic banks and Conventional Banks. This study evaluated and co pared the performances and of between the Bank Islam Malaysia with and Maybank in terms of profitability, liquidity, risk, and efficiency for the period of 2004-2008 financial ratios (12 in total) such as Return on Asset ROA), Return on Equity (ROE), Loan to Deposit ratio (LDR), Loan to Assets ratio (LAR), Debt to Equity ratio (DER), Asset Utilization (AU), and Income to Expense ratio (IER) were used to assess banking performances. T-test and F-test are employed in determining the significance of the differential performance of the two groups of banks. This study found that Bank Islam Malaysia is less profitable, more solvent (less risky), and also less efficient compared to the average of the two conventional banks.
However, there was no significant difference in liquidity between the two sets of banks. The reasons were due to the fact that conventional banks in Malaysia have longer history and experience in doing banking business and hold dominating position in the financial sector with its large share in the overall financial assets of Malaysia, as compared to Islamic banks, which in true sense, started only a few years back. Albeit, the study found that conventional banks are less profitable, more solvent (less risky), and less efficient during 2004-2008, however, it is improving considerably over time indicating convergence with the performance of the conventional banks.
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