Comparative Financial Performance of Islamic and Conventional Banks in a Non-Muslim Country

Abstract

This study examines and compares the financial performance of Islamic banks and conventional banks in Tanzania. The study uses univariate analysis to compare performance ratios for seven (7) years from 2013 to 2020. The study applies t-test to examine whether profitability, liquidity, and credit management ratios are different between Islamic and conventional banks. It was found that conventional banks outperform Islamic banks in Tanzania. Islamic banking is a recent phenomenon in Tanzania and the environment does not support its development as Tanzania is not an Islamic country and does not fully support the nature of Islamic bank operations due to the fact that some of its policies and laws are not in alignment with Islamic banking activities. Hence, it can only transact a limited number of products.