Comparative Study on Islamic and Conventional Banks: Cases in The Gambia and United Kingdom

This research paper investigates the performance of Islamic and Conventional banks in The Gambia and United Kingdom for the periods 2008/2009 to 2012. Islamic banking is conceived by many as a recent phenomenon which in the last few decades attracted lots of attention and discussions. Islamic banking is a system of banking that is in consistent with Islamic law (Sharia). Islam does not allow the payment or acceptance of interest charges (Riba) in banking activities such as lending and depositing of money. Whiles Conventional banks deal with Interest, Islamic banks method of operation is strictly based on Sharia principles (profit, loss and risk sharing). The objective of this study is to analyze and investigate the impact of the financial crisis on the performance of some Islamic and Conventional banks in The Gambia and United Kingdom. Financial ratios are used to measure Profitability, Liquidity and Financial Leverage of the banks. The empirical results of the analysis showed that the Islamic banks selected for the study generally fared better than their counterpart Conventional banks in terms of Liquidity and Financial Leverage during and after the financial crisis. Among other findings, the selected Conventional Banks in this study are found to be relatively more profitable than their peer Islamic banks from 2008/2009 to 2012