Conventional and Islamic Bank Stability in Bangladesh using NPL Model

International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue VI, June 2020 | ISSN 2454–6186

Conventional and Islamic Bank Stability in Bangladesh using NPL Model

Kh Khaled Kalam¹, An-Nisha Khatoon^2
1Finance and Human Resource Management Lecturer, Business School, Shandong Xiehe University, China
²Senior Executive, Training & Operation, Time ASL Training Institute, Times Group, Bangladesh

Abstract: Islamic Banking system is a rapidly growing financial system over the Conventional Banking system in Bangladesh. As the conventional banks are more profit-maximizing regarding based on loan and mortgage. This study focused on the Non-Performing Loan and Efficiency for both Conventional and Islamic Banking sector in Bangladesh from 2008 to 2018. The study evaluates by analyzing Total Asset, Loan to asset, Inflation, Income Diversity, GDP and Cost to income. The last part also analysis the Descriptive, Correlations and Regression for the Data. The study explained that the inflation rate has a significantly negative impact on non-performing loan of the conventional banking system in Bangladesh. On the other hand, Islamic financing system is more efficient and convenient for the Bangladesh environment regarding non-performing loan management.

Keywords: Non-performing loan, Islamic Banking, Conventional Banking, Loan Asset.

I INTRODUCTION

For a country’s development, banking system is always consider as a most important sector. Banking sector have a great impact on financing activity and capital market which develop a country’s economy (Osama, Mohammad 2013). For financing in business and financial institute bank is the main sources. Currently the Banking sector follow two kind of system banking system and the regulatory conditions as: Conventional Banking and Islamic Banking System. The main feature of Islamic Banking which makes it different from traditional banking is the prohibition of interest payment in transection and in other banking activities. The bank only share the profit or loss with the client and never tolerate the unethical behavior as they takes undertaking of a client they will not related with any kind of unscrupulous activities (Majid, Saal and Battisti 2009). On the other hand Conventional banking is based on general banking which is mainly focused on interest related transaction. Islamic Financing in the banking sector derives its practice from immutable principles rooted in the rulings of the Shari’ah legal code. Therefore, it involves accounting and financial norms that differ from its conventional banking counterparts (Hussain, Shahmoradi & Turk 2016). In the beginning of the emergence, Islamic Banking system faced a lot difficulties and challenges but later its size and complexity grows as they become the essential part of the national and international financial services industry.

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