Abstract

Onakoya, Adegbemi Babatunde and 2 Onakoya, Adekola Olaitan

The study investigates the performance efficiency of conventional banks and Islamic banks in the United Kingdom between 2007 and 2011. A comparative study of the top four Islamic and five conventional banks is undertaken based on selected financial ratios as performance indicators. The collated secondary data derived from the banks’ financial statements are transformed to percentages and ratios so that comparison can be made between the different banks and periods. Comparing conventional and Islamic banks and controlling for all other factors, the authors find few significant differences in business orientation and performance in the areas of liquidity, profitability, risk and solvency and efficiency. The conventional banks are more profitable in addition to being better able to effectively and timely meet up with financial obligations. However, Islamic banks are less exposed to liquidity risk and appear to be more cost-effective while the conventional banks depend more on external sources for funding. The study recommends the broadening of Islamic banking finance management skills. In addition, innovation and differentiation would strengthen Shari’a-compliant products and provide greater attraction to all customers as well as fostering integration with the real economy