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7. Results and Conclusions
Based on the empirical analysis, there is no doubt that the use of financial ratios such as Profitability, Liquidity and Financial Leverage are good performance indicators between Islamic and conventional banks in this study.
The purpose of this research work is to answer the question whether the only Islamic bank in The Gambia perform better than its Conventional bank peers during the recent global financial crisis. The empirical analysis makes it possible for me to draw some conclusions. I used six ratios for The Gambia and the period of study is from 2009 to 2012. Although AGIB’s Liquidity position in 2009 was no better than Conventional banks, the results reveal that on average from 2009 to 2012, AGIB (Islamic Bank) fared better than its counterpart Conventional banks (TBL, GTB and Eco). Profits of TBL and GTB in this report are found to be relatively higher than AGIB and Eco bank. Overall Conventional Banks fared better in terms of profitability for the period under review.
My findings on Financial Leverage for banks in The Gambia shows that Conventional banks from 2009 to 2012 on average are moderately riskier than their counterpart Islamic bank for the period under review.
To examine how well Islamic Banks in the UK performed during the financial crisis of 2008 to 2009, I used four ratios for the analysis. The results of the two Islamic and two Conventional banks selected for the study is thus:
In terms of Liquidity, there is an indication that, Islamic banks on average performed better than their counterpart peer Conventional banks during and after the financial crisis. Profitability
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deteriorated for both banking systems during and after the financial crisis. However, this loss was more on Islamic banks than Conventional Banks. There might be many reasons behind the deterioration in profitability of selected Islamic banks in the UK. However, I suggest one of the reasons could be that selected Islamic banks in the UK incur high operating and impairment cost, which consequently suppressed their incomes during and after the financial crisis.
Overall, it is found that on average ROA and ROE of Islamic banks selected for this study had moderately been lower compared to their competitor Conventional banks. Based on the results, Conventional banks are found to be relatively more profitable than Islamic banks. Consequently, the analysis suggest that Islamic banks during the financial crisis on average suffered more on ROA and ROE than their competitor Conventional banks. With regards to Liquidity (CR, CDR and LDR), the results shows that selected Islamic banks on average performed better than their counterpart peer Conventional banks during and after the financial crisis.
While Islamic banks profitability is lower than its competitor Conventional banks, it is good to note that when it comes to risk and solvency measures, “the greater the risk the greater the returns”. Based on this simple principle of finance, my conclusion on Profitability, Risk and Solvency for the selected banks is that Conventional banks even though on average were more profitable but also were moderately riskier, than their counterpart Islamic banks.
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