Performance of Islamic Banks in Comparison with Conventional Banks in Malaysia

This paper explores the comparative performance of Malaysia's interest-free lslamic banks (including foreign players) against the interest-based conventional banks for the period 2005 - 2008 with respect to their business volume and performance. This study is conducted in response to pessimistic feedback about lslamic banks' performances that are not only required to comply both conventional business laws and lslamic laws, but also need to forgo business opportunities that are against with laws of Islam. At the same time, the business performance of these banks is questioned due to stiff competition in the market. This study divided the Islamic banks into three (3) categories i.e. local lslamic full-fledge banks, local lslamic subsidiary banks and foreign lslamic banks. Based on descriptive analysis, the study found that local conventional banks in group are relatively performing better than the rest of lslamic banks in terms of business volume. Nevertheless, upon applying t-test analysis to six selected financial ratios, this study revealed that, in general, the performances of both local and foreign lslamic banks are at par and competitive with local conventional banks