A Comparative Examination of Productivity in Islamic and Conventional Banking in Bangladesh

Abstract

This study aims to evaluate and compare the productivity of Islamic and conventional (traditional) banks in Bangladesh from 2018 to 2022. To measure productivity, a sample of 10 commercial banks in Bangladesh, 5 of which are Islamic and 5 of which are conventional, is used, and a productivity model, financial tools, and statistical tools are chosen for data analysis. The selection of sample banks in each category is based on the highest profit earned in relation to the number of employees and branches in 2022. This study considers deposit, advance/investment, revenue and profit as output and number of employees, number of branches, and amount of capital as input to the productivity model. The results indicate that the productivity of Islamic banks (IBs) is higher in deposit procurement, distribution of new investments, net spread income per employee, and net spread income per unit of capital than that of conventional banks (CBs), while the productivity of CBs is higher in net interest income (NII) per branch, net non-interest income, operating profit, and net profit than that of IBs. Analysis of variance shows the differences in productivity measures—employee productivity (EP), branch productivity (BP), and capital productivity (CP)—between CBs and IBs are not significant, except for NII per unit of capital. IBs can take steps to increase non-investment income and fee-based earnings and control administrative and other overhead expenses, while CBs can take steps to increase more deposits and advances through the utilization of their available input resources: EP, BP, and CP.

Received: 31 October 2024 | Revised: 16 December 2024 | Accepted: 25 February 2025

Conflicts of Interest 

The authors declare that they have no conflicts of interest to this work.

Data Availability Statement

The data that support the findings of this study are openly available in "figshare" at https://figshare.com/s/dba755d63b7caee42714

Author Contribution Statement

G. M. Anwar Hossain: Conceptualization, Methodology, Formal analysis, Investigation, Data curation, Writing – original draft, Project administration. Md. Ruhul Amin: Methodology, Validation, Formal analysis, Resources, Supervision. Md. Shahbub Alam: Formal analysis, Writing – review & editing, Visualization, Supervision. Atifa Kafi: Writing – review & editing, Visualization, Supervision, Project administration.