A Comparative Analysis of Islamic and Conventional Cooperative Societies: A Case Study of Al-Ikhlas and University of Ibadan Workers' Cooperative Investment and Credit Societies

The nature and performance of cooperative societies have encouraged different people to join different cooperatives. Existing studies have examined the impact of cooperatives on people and businesses with scant attention paid to the comparison between Islamic and conventional cooperatives and their financial statuses. A comparison of both is necessary to weigh the relative impact of each on their respective members.  Therefore, this study compared Islamic and conventional cooperative societies, using Al- Ikhlas Cooperative Society and University of Ibadan Workers' Cooperative Investment and Credit Society (UI Workers' Cooperative) as a case study. Data comprised the audited annual financial statements of both cooperatives for the period of 5 years, 2014 to 2018. They were analysed, using ratio-based model, CAMEL (Capital, Asset, Management, Efficiency and Liquidity) and growth rate of share capital to measure their performance and operational efficiency. While UI Workers' Cooperative engages in different types of investments, including those prohibited by Sharî'ah, Al-Ikhlas invests only in products and services allowed in Sharî'ah. The net surplus growth rate of UI Workers' Cooperative (42.12%) was greater than that of Al-Ikhlas society (18.88%). At an average, Al-Ikhlas' capital adequacy ratio (3.65%), members' savings (18.94%) and Management efficiency ratio (91.22%) were higher than those of UI Workers' Cooperative of 2.17%, 7.91% and 59.78%, respectively. Al-Ikhlas is self-sustaining and growing despite avoiding investments prohibited Shariah. By implication, Islamic cooperatives tend to impact more on its members than do conventional cooperatives on its members. Keywords: Interest-based cooperative, interest-free cooperative, performance, financial ratios, CAMEL mode