Comparison of Financial Performance between Islamic Banks and Conventional Banks

Abstract

This study aims to analyze and compare the financial performance of Islamic banks and conventional banks. Comparing financial performance is important to assess the effectiveness of the Islamic banking system in relation to conventional banking in performing its financial intermediation function. This research employs a quantitative approach using financial ratio analysis, including profitability, liquidity, and solvency ratios. The data used are secondary data obtained from the annual financial statements of Islamic banks and conventional banks operating in Indonesia during the research period. Data analysis techniques include descriptive statistical analysis and difference tests to determine the significance of differences in financial performance between the two types of banks. The results indicate that there are differences in financial performance between Islamic banks and conventional banks across several financial ratio indicators, although certain indicators show relatively similar performance. These findings suggest that differences in operational systems and underlying principles influence the financial performance of each type of bank.  This study is expected to contribute to the development of banking literature and serve as a reference for regulators, banking practitioners, and the public in understanding the financial performance of Islamic and conventional banks.