A Comparative Study of Stability & Consumer Confidence between Islamic & Conventional Banks in Bangladesh

  • Sisili Rahman University of Asia Pacific, Dhaka, Bangladesh
Keywords: Islamic Bank, Conventional Bank, Stability, Consumer Confidence, Unit Root Test, Random Effect Regression


This study exhibits a comparative analysis of consumer confidence and bank-level stability factors between Islamic and conventional banks in Bangladesh. The study finds that despite having lower liquidity Islamic banks are able to   provide   higher   consumer   confidence   levels   than   conventional   banks. Islamic  banks have reported  very  small  Non performing asset (NPA),  and  shown  a  positive  and  significant relationship with liquidity implying that during the crisis Islamic banks tend to take rigid risk strategies compared to conventional banks. Cost income ratio (CIR) is inversely and insignificantly related in both types of banks. As increase in cost decreases the stability of the bank, profit before tax (PBT) gives expected positive and significant relationship in all cases. Increase in PBT increases the stability and consumer confidence level but the level of significance is higher in case of Islamic banks. CC represents consumers’ confidence and shows positive result in all cases but with an exception with conventional bank in TQ factor.

Author Biography

Sisili Rahman, University of Asia Pacific, Dhaka, Bangladesh

Sisili Rahman has been working as a full time lecturer in Finance at the Business School of University of Asia Pacific, Dhaka Bangladesh (May 2016-till date). Prior to that, she worked as a Financial Analyst (Corporate Division) in the country’s one of the leading financial institutions LankaBangla Finance Limited just after the completion of her M.B.A from Department of Finance, University of Dhaka. She had done her B.B.A from the same department at University of Dhaka. Being a new academician she has started her research work very recently. She has presented a paper in International Conference on Business and Economics, 2017.  Capital Market, Behavioral Finance, Portfolio Management, Financial Reporting, Banking and other Financial Services are some areas of her research interest.


Affiliation and Contact No.


Sisili Rahman


Department of Business Administration, University of Asia Pacific, Bangladesh

74/A, Green Road, Farmgate, Dhaka - 1215, Bangladesh

Email: sisili_du@yahoo.com 

Contact: +8801766315770, +8801680916294


AI-Abdullatif, S. Abdullah, “The application of the AAOIFI accounting standards by the Islamic banking sector in Saudi Arabia”, Doctoral dissertation, Durham University, 2007.

Alaro, A. Razzak., & M. Hakeem, “Financial engineering and financial stability: the role of Islamic financial system”, Journal of Islamic Economics, Banking and Finance, vol. 7(1), 25-38, 2011.

A. Levin, C. F. Lin, and C. S. J Chu, “Unit root tests in panel data: asymptotic and finite-sample properties”, Journal of econometrics, vol. 108(1), pp. 1-24, 2002.

A. N. Berger, W. C. Hunter, and S. G. Timme, “The efficiency of financial institutions: A review and preview of research past, present and future”, Journal of Banking & Finance, vol. 17(2-3), pp. 221-249, 1993.

A.Q.M. S. Arif, Secretary General, Central Shari‘a Board for Islamic Banks of Bangladesh, An Interview, 16 April, 2014.

Azad, M. A. Kalam., and Â. M. R Sir, “Prospects analysis of an Islamic capital market in Bangladesh”, Global Journal of Management And Business Research, 2013.

Bader, M. I. Khaled, S. Mohamad, M. Ariff, and T. H. Shah, “Cost, revenue, and profit efficiency of Islamic versus conventional banks: international evidence using data envelopment analysis”, 2008.

F. Allen, D. Gale, “Competition and Financial Stability. Journal of Money, Credit and Banking”, vol. 36(3), pp. 453-480, 2004.

G. Bekaert, C. R. Harvey, C. Lundblad, and S. Siegel, “Global growth opportunities and market integration”, The Journal of Finance, vol. 62(3), pp. 1081-1137, 2007.

G. L. Kaminsky, and C. M. Reinhart, “The twin crises: the causes of banking and balance-of-payments problems”, American economic review, vol. 89(3), pp. 473-500, 1999.

H. A. Loghod, “Do Islamic banks perform better than conventional banks? Evidence from Gulf cooperation council countries”, Journal of Management, vol. 7(3), pp. 56-72, 2010.

H. I. Mobolaji, and A. R. A. Alaro, “Financial Engineering and Financial Stability: The Role of Islamic Financial System”, Journal of Islamic Economics, Banking and Finance, vol. 113(464), pp. 1-14, 2011.

I. S. Drissi, and K. Angade, “Islamic financial intermediation the emergence of a new model”, European Journal of Islamic Finance, vol. 12. pp. 1-7, 2019.

J. C. Rochet, “Capital requirements and the behaviour of commercial banks”, European Economic Review, vol. 36(5), pp. 1137-1170, 1992.

K. Hussein, “Bank-Level Stability Factors and Consumer Confidence—A Comparative Study of Islamic and Conventional Banks’ Product Mix”, In Islamic Finance, pp. 86-104. Palgrave Macmillan, Cham, 2016.

K. Mukminin, “Profit maximization in islamic banking: an assemblage of maqasid shariah conception”, European Journal of Islamic Finance, vol. 12, 2019.

S. Kwan, R. A. Eisenbeis, “Bank risk, capitalization, and operating efficiency”, Journal of financial services research, vo. 1;12 (2-3), pp. 117-31, 1997.

M. Ariff, “Islamic banking, a variation of conventional banking”, Monash Business Review, vol. 4(3), pp. 1-8, 2006.

M. Hasan, and J. Dridi, “The effects of the global crisis on Islamic and conventional banks: A comparative study”, Journal of International Commerce, Economics and Policy, vol. 2(02), pp. 163-200, 2011.

M. Iqbal, P. Molyneux, and S. Conermann, “Thirty years of Islamic banking. History, Performance and Prospects”, Bankhistorisches Archiv, 32(2), 155-158, 2006.

M. K. Hassan, M. and A. H. M. Bashir, 2003 “Determinants of Islamic banking profitability”, 10th ERF annual conference, Morocco, vol. 7(1), pp. 2-31, 2003.

M. K. Hassan, and M. F. Dicle, “Basel II and regulatory framework for Islamic banks”, Journal of Islamic Economics, Banking and Finance, vol. 1(1), pp. 1-16, 2005.

M. L. Rahman, and S. H. Banna, “Liquidity Risk Management: A Comparative Study between Conventional and Islamic Banks in Bangladesh”, Journal of Business and Technology (Dhaka), vol. 10(2), pp. 18-35, 2015

M. Rahim, S. Rohaya, and R. H. Zakaria, “Comparison on stability between Islamic and conventional banks in Malaysia” Journal of Islamic Economics, Banking and Finance, vol. 113(915), pp. 1-19, 2013.

M. U. Chapra, “The future of economics: An Islamic perspective”, Kube Publishing Ltd. vol. 21, 2016.

P. P. Biancone, and M. Radwan, “European companies: evaluation for sharia compliance “opportunities and challenges”, European Journal of Islamic Finance, vol. 5, 2016.

P. P. Biancone, and M. Radwan, “Social Finance And Unconventional Financing Alternatives: An Overview”, European Journal of Islamic Finance, vol. 10, pp. 1-6, 2018.

R. Ameer, R. Othman, and N. Mahzan, “Information asymmetry and regulatory shortcomings in profit sharing investment accounts”, International Journal of Islamic and Middle Eastern Finance and Management, vol. 5(4), pp. 371-387, 2012.

R. F. Engle, and C. W. Granger, “Co-integration and error correction: representation, estimation, and testing, Econometrica” journal of the Econometric Society, pp.251-276, 1987.

S. Kwan, and R. A. Eisenbeis, “Bank risk, capitalization, and operating efficiency”, Journal of financial services research, vol. 12(2-3), pp. 117-131, 1997.

T. Beck, Demirgüç-Kunt, A., and O. Merrouche, “Islamic vs. conventional banking: Business model, efficiency and stability”, The World Bank, 2010.

A. D. Dickey, D. P. Hasza, and W. A. Fuller, “Testing for unit roots in seasonal time series”, Journal of the American Statistical Association, vol. 79(386), pp.355-367, 1984.

P. V. Phillips, and P. Perron, “Testing for a unit root in time series regression”, Biometrika, Vol. 1;75(2), pp. 335-46, 1988.

How to Cite
Rahman, S. (2019). A Comparative Study of Stability & Consumer Confidence between Islamic & Conventional Banks in Bangladesh. European Journal of Islamic Finance, (13). https://doi.org/10.13135/2421-2172/3184