Islamic vs. Conventional Banks in Syria: Analysis on Financial Performances

Khaled Nour Aldeen* -  Faculty of Economics and Business, Universitas Airlangga, Indonesia
Sri Herianingrum -  Faculty of Economics and Business, Universitas Airlangga, Indonesia
Ziad Mhmmad Wafik al Agawany -  Faculty of Economics, Damascus University, Syrian Arab Republic
DOI : 10.22515/shirkah.v5i1.291

Doubtful finance is the worst nightmare for banks, but this can be avoided if a bank follows a proper strategy to avoid such kind of finance. Due to the violent political crisis in the country, most of the contemporary studies have excluded Syria from their samples. The present study aims to evaluate the performances of Islamic and conventional banks in Syria through a comparative analysis. A secondary aim of this study is to shed some light on the main factors influencing non-performing finance in both Islamic and conventional banks. This study addressed the entire private banking sector in Syria consisting of 11 conventional banks and 3 full-fledged Islamic banks over the period of 2011-2017. To this end, several financial ratios and macroeconomic variables along with independent sample t-test and panel data regression were employed. The results indicated that the Islamic banks were better in terms of assets quality. Panel data regression manifested that gross domestic product growth, exchange rate, finance to deposit ratio, and operating expenses ratio had a significant impact on non-performing finance. This study provides an alluded picture of Syrian private banking sectors that enables authorities to deliberate on the pertinent macroeconomic NPF determinants such as exchange rate and GDP growth.


Keywords : Islamic Banks (IBs), Conventional Banks (CBs), Financial Performance, Non-Financial Performance (NPF), Syria

  1. Abbas, M., Azid, T., & Besar, M. H. A. H. (2016). Efficiency, effectiveness and performance profile of Islamic and conventional banks in Pakistan. Humanomics, 32(1), 2–18.
  2. Adewole, C., & Patrick, P. E. (2019). A comparative analysis of the financial performance of Islamic and conventional banks in Nigeria. International Journal of Management Science Research, 4(2), 1–18.
  3. Ahmad, F. and T. B. (2013). Explanatory power of bank specific variables as determinants of nonperforming loans: Evidence from Pakistan banking sector. World Applied Sciences Journal, 22(3), 1220–1231.
  4. Ahmed, H., Hassan, M. K., & Rayfield, B. (2018). When and why firms issue sukuk? Managerial Finance, 44(6), 774–786. https://doi.org/10.1108/MF-06-2017-0207
  5. Akhtar, M.F., Ali, K., & Sadaqat, S. (2011). Liquidity risk management: a comparative research between conventional and Islamic banks of Pakistan. Interdisciplinary Journal of Research in Business, 1(1), 35–44.
  6. Anbar, A., & Alper, D. (2011). Bank specific and macroeconomic determinants of commercial bank profitability: Empirical evidence from Turkey. Business and Economics Research Journal, 2(2), 139–152.
  7. Badar, M. & Javid, A. Y. (2013). Impact of macroeconomic forces on non-performing loans: an empirical study of commercial banks in Pakistan. WSEAS Transactions on Business and Economics, 1(10), 40–8.
  8. Beck, R., Jakubik, P. & Piloiu, A. (2013). Non-performing loans: What matters in addition to the economic cycle? European Central Bank Working Paper Series, 15(15), 1–32.
  9. Beck, T., Demirgüç-Kunt, A., & Merrouche, O. (n.d.). Islamic vs. conventional banking: business model, efficiency and stability. Journal of Banking and Finance, 37(2), 433–447.
  10. Central bank of Syria, (2019). Legislations and Regulations, available at http://www.cb.gov.sy/en/legislations-laws/all (accessed 21 January 2019).
  11. Das, J. K., & Dey, S. (2019). Factors Contributing to Non-Performing Assets in India: An Empirical Study. Review of Professional Management, 16(2), 62-70
  12. Dash, M. K., & Kabra, G. (2010). The determinants of non-performing assets in Indian commercial bank: An econometric study. Middle Eastern Finance and Economics, 7(2), 94–106.
  13. El-Chaarani, H. (2019). Determinants of bank liquidity in the Middle East region. International Review of Management and Marketing, 9(2), 64.
  14. Ghenimi, A; Omri, M. A. B. (2015). Liquidity Risk Management: A Comparative Study between Islamic and Conventional Banks. Journal of Business Management and Economics, 3(1), 25–30.
  15. Godlewski, C. (2004). Capital Regulation and Credit Risk Taking: Empirical Evidence from Banks in Emerging Market Economies. Available at SSRN 588163
  16. González, L. O., Razia, A., Búa, M. V., & Sestayo, R. L. (2019). Market Structure, Performance, and Efficiency: Evidence from the MENA Banking Sector. International Review of Economics & Finance, 12(1).
  17. Gujarati, D. N., & Porter, D. (2009). Basic Econometrics Mc Graw-Hill International Edition.
  18. Haniifah, N. (2015). Economic determinants of non-performing loans (NPLs) in Ugandan commercial banks. Taylor’s Business Review, 5(2), 137–153.
  19. Hashem, B., & Sujud, H. (2019). Financial Performance of Banks in Lebanon: Conventional vs Islamic. International Business Research, 12(2), 40–51.
  20. Hassan, T., Mohamad, S. and Bader, M. K. I. (2009). Bank efficiency and non-performing financing (NPF) in the Indonesian Islamic banks. International Journal of Islamic and Middle Eastern Finance and Management, 2(1), 46–65.
  21. Hassan, A. (2009). Risk management practices of Islamic banks of Brunei Darussalam. The Journal of Risk Finance, 10(1), 23‐37.
  22. Havidz, S. A. H., & Setiawan, C. (2015). Bank efficiency and non-performing financing (NPF) in the Indonesian Islamic banks. Asian Journal of Economic Modelling, 3(3), 61–79.
  23. Jimenez, G., S. J. (2006). Credit cycles, credit risk, and prudential regulation. International Journal of Central Banking, 2(2), 65–98.
  24. Kamarulzaman, Y., & Madun, A. (2013). Marketing Islamic banking products: Malaysian perspective. Business Strategy Series, 14(2–3), 60–66. https://doi.org/10.1108/17515631311325114
  25. Kennedy, P. (2008). A guide to econometrics. Malden, MA: Blackwell Publishing.
  26. Khalid, S. & Amjad, S. (2012). Risk management practices in Islamic banks of Pakistan. The Journal of Risk Finance, 13(2), 148–159.
  27. Khan,. I., Khan, M., & Tahir, M. (2017). Performance comparison of Islamic and conventional banks: empirical evidence from Pakistan. International Journal of Islamic and Middle Eastern Finance and Management, 10(3), 419–433.
  28. Khemraj, T. & Pasha, S. (2009). The determinants of non-performing loans: an econometric case study of Guyana. Munich Personal RePEc Archive Research Working Paper, 5(3), 28–53.
  29. Lis, S.F. de, J.M. Pages, and J. S. (2000). Credit Growth, Problem Loans and Credit Risk Provisioning in Spain Banco de España. Servicio de Estudios, Documento de Trabajo No, 1(1), 0018.
  30. Louzis, D. P., Vouldis, A. T., & Metaxas, V. L. (2012). Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage, business and consumer loan portfolios. Journal of Banking & Finance, 36(3), 1012–1027.
  31. Mahdi, I. B. S., & Abbes, M. B. (2018). Relationship between capital, risk and liquidity: a comparative study between Islamic and conventional banks in MENA region. Research in International Business and Finance, 45(1), 588–596.
  32. Masruki, R., Ibrahim, N., Osman, E., & Wahab, H. A. (2010). Financial performance of Malaysian founder Islamic banks versus conventional banks. Journal of Business and Policy Research, 6(2), 67–79.
  33. Messai, A. S., & Jouini, F. (2013). Micro and macro determinants of non-performing loans. International Journal of Economics and Financial Issues, 3(4), 852–860.
  34. Moin, M. S. (2008). Performance of Islamic banking and conventional banking in Pakistan. Master’s Thesis, University of Skovde, Skovde, Sweden.
  35. Nevine, S., & Abdel, M. (2017). Liquidity risk management: conventional versus Islamic banking system in Egypt. Journal of Islamic Accounting and Business Research, 8(1), 100–128.
  36. Nour Aldeen, K., Ali Shah, S. A., & Herianingrum, S. (2019). Patronage of Islamic and Coventional Banks: The Case of Syria. AL-Uqud: Journal of Islamic Economics, 3(2), 98–113.
  37. Olson, D., & Zoubi, T. A. (2008). Using accounting ratios to distinguish between Islamic and conventional banks in the GCC region. The International Journal of Accounting, 43(1), 45–65.
  38. Rajan, R., Dhal, S. C. (2003). Non-performing loans and terms of credit of public sector banks in India: An empirical assessment. Reserve Bank of India Occasional Papers, 24(3), 81–121.
  39. Rosly, S. A., & Bakar, M. A. A. (2003). Performance of Islamic and mainstream banks in Malaysia. International Journal of Social Economics, 30(12), 1249–1265.
  40. Sobhy, N., & Megeid, A. (2017). Liquidity risk management: conventional versus Islamic banking system in Egyp. Journal of Islamic Accounting and Business Research, 8(1), 100–128.
  41. Sukmana, R., & Febriyati, N. A. (2016). Islamic banks vs conventional banks in Indonesia: an analysis on financial performances. Jurnal Pengurusan (UKM Journal of Management), 47(1), 81-90.
  42. Tariq, M., Tahir, A., Momeneen, W., & Hanif, M. (2012). Comparative performance study of conventional and islamic banking in Pakistan. International Research Journal of Finance and Economics, 83(1), 62–72.
  43. Wasiuzzaman, S., & Gunasegavan, U. N. (2013). Comparative study of the performance of Islamic and conventional banks: The case of Malaysia. Humanomics, 29(1), 43–60.

Shirkah: Journal of Economics and Business
Published by Faculty of Islamic Economics and Business (FEBI)
Institut Agama Islam Negeri Surakarta, Indonesia
Jln. Pandawa No. 1, Pucangan, Kartasura, Central Java, Indonesia, 57168
Phone: +62271-781516
Website: http://shirkah.or.id/new-ojs/index.php/home
Email: shirkahiainsurakarta@gmail.com

P-ISSN :2503-4235 | E-ISSN : 2503-4243

This ejournal system and it's contents licensed under
a Creative Commons Attribution-NonCommercial 4.0 International License