Islamic banking is operating on the Sharia principles of finance. Here, the transactions are Riba free and avoid unethical practices, participate actively to achieve goals and objectives of Islamic Economy. On the other hand, conventional banks are operating on the man-made principles where the predetermined rate of interest is the core activity. This research study analyses the performance of Islamic versus conventional banks in Pakistan over the period of 2008-2010. The aim of this study is to examine and to evaluate the performance of the two Islamic banks (Meezan and Dubai Islamic) and two conventional banks (MCB and HBL) in Pakistan for the year 2008 to 2010. Pakistan has been chosen as a focal point for the study since both types of banks are erforming in the market and there has been no such study previously in the country. This research study investigates whether Islamic banks are performing well in Pakistan compared to the conventional banks. Financial ratio analysis for liquidity, profitability, solvency and activity analysis of the mentioned banks from both categories was performed to test the overall performance. The result indicates that conventional banks are more profitable than Islamic banks in Pakistan for year 2008 to 2010. Islamic banks in Pakistan have better current, cash, debt to asset and asset turnover ratio while conventional banks have good performance in other remaining ratios. Although in some ratios performance of Islamic banks are also good but according to overall results conventional banks of Pakistan are more efficient than Islamic banks for year 2008 to 2010.
Keywords: Performance, Islamic Banking,