Performance of Islamic banks and conventional banks
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In this chapter an attempt is made for the first time to assess the financial performance of Islamic banks and conventional banks by choosing a matched sample of banks to assess their financial performance across the world over a lengthy period. Islamic banking is based on replacing the prefixed-interest-based bank deposit-turn-lending activities with risk-sharing and profit-sharing principles advocated by Islam, which in turn appears to be consistent with the social norms of pre-modern societies prior to the rise of interest-based fractioning banking in the last 200 years, which refers tothe fractional-reserve banking from the close of the 18th century. Risk- and profit-share principles in financial transactions have been with humanity for a long time and they are still practiced silently in most rural non-bank lending activities across the world.
This document has been peer reviewed.