Comparative Superiority Test of Conventional Banking and Islamic Banking in the Context of Bangladesh.

The financial sector in Bangladesh is primarily dominated by the commercial banking system, with non-bank financial institutions and the capital market playing a limited role. Commercial banks hold a substantial share of the financial system's assets and significantly contribute to the country's economic development. In this context, it's worth noting that commercial banks in Bangladesh operate using two main models: interest-based conventional banks and interest-free Islamic banks, the latter being based on Islamic Sharia principles. A study has been conducted to analyze the financial performance of these two types of banks, focusing on various factors such as business development, profitability, liquidity, solvency, commitment to the economy and community, efficiency, and productivity. The study results revealed that both types of banks exhibit notable financial performance but with varying strengths in different areas. In particular, the study found that interest-based conventional banks excel in terms of their commitment to the economy and community, productivity, and efficiency. Conversely, interest-free Islamic banks demonstrated superior performance in business development, profitability, as well as liquidity, and solvency. Upon analyzing the overall findings, the study suggests that interest-free Islamic banks hold a superior position in terms of financial performance when compared to interest-based conventional banks. This conclusion provides valuable insights into the distinctive strengths and performance indicators of each banking model, contributing to a comprehensive understanding of the financial landscape in Bangladesh.