JKAU: Islamic Econ., Vol. 27 No.

1, pp: 73-99 (January 2014)

DOI: 10.4197 / Islec. 27-1.3

A Study of Islamic and

Conventional Banks in Malaysia

Cheng Fan Fah and Abbas Hassani

Abstract: Many scholars have researched comparison of

conventional and Islamic banking systems, with regards to their
performance from time to time. This study compares their
respective profitability in terms of volume and volatility of their
deposits and loans in Malaysia in a six years period (2006-
2011) that other writers have not discussed in detail. The results
in this study indicate that there are positive and significant
relationships between volume of loans and volume of
customers’ deposits and profitability of banks. However,
volatility of loans and deposits does not have a significant
impact on banks’ profit-efficiency in Malaysia. The results of
this research also reveal that Malaysian conventional banks
were more profitable than Islamic banks during the period of
study. The ROA and ROE are significantly different and mean
of ROA and ROE in conventional banks are higher than those
in Islamic banks. The main contribution of banks’ profits comes
from the spread between the interest earned on loans and the
return payable on customer deposits. Both of these are internal
factors. Volume of loans and volume of deposits are found to
have significant influence on banks’ profitability. Therefore,
managers and banks’ administrators should either focus their
attention on these two determinants or adopt some kind of
policies that will lead banks to increase their volume of loans
and deposits to boost banks profitability level.
Keywords: Islamic banks, conventional banks, volume of
deposits, loans, volatility of loans, volatility of deposits, profit
efficiency.

1. Introduction
Based on the traditional definition, banks act as intermediaries in the
allocation of financial resources, and gathering deposits from savers and
offering loans to consumers, businesses and governments. In the modern
definition of banking, banks are seen as factories engaged in information
processing, looking into all aspects of deal e.g., investment, corporate
finance, insurance, trust and retirement services (Sinkey, 1983).
73
74 Cheng Fan Fah and Abbas Hassani 

Conventional banks take deposits from savers and investors, paying

interest on some of these accounts as their investments yield returns. On
the other hand, they lend these collected funds to borrowers, to receive
interest on them. In this way, banks make a profit from the spread
between the rate that they pay to depositors and the rate that they receive
from borrowers. This ability of banks to pool deposits from many sources
that can be lent to many different borrowers creates the flow of funds
characteristic of the banking system. By managing this flow of funds,
i.e., acting as intermediaries between providers and users of funds, banks
generate value for the society.

Islamic Banking
Conventional banking system was the only available option before the
emergence of Islamic banking system in early 1970s. Now Islamic banks
are managing all financial and banking processes around the world for
several years. Muslim investors around the globe also communicated and
dealt with conventional banks. They employed conventional instruments
even though these were not completely compatible with Islamic financial
principles. Yahya and Hadi (2012) refer to the description of an Islamic
bank by the Organization of Islamic Conference (OIC) in the following
way:

“[…] a financial institution whose statutes, rules and procedures

expressly state its commitment to the principles of Islamic Sharīʿah
(Islamic law) and to the banning of the receipt and payment of interest on
any of its operations”.

Islamic banking system was based on Islamic principles as taught in

the Qur’ān and Sharīʿah. It avoids participation in prohibited (ḥarām)
activities such as gambling (maysir), interest-based investment (ribā),
gharar and investment in the trade of forbidden goods such as alcohol.
Moreover, it improves equity, fairness and transparency of all
transactions (Diaw and Mbow, 2011). It also takes into account the
Muslim belief in the Hereafter, which affects their attitude towards
investment in contrast to the purely materialistic approach towards
banking taken by secular capitalists (Usman and Khan, 2012).

In the four decades of its practice, Islamic banking has been growing
rapidly, in volume as well as geographically. Islamic banking is no more
 
 A Study of Islamic and Conventional Banks in Malaysia 75 

limited to Islamic countries. Now it has a global reach. Today more than
70 countries around the world offer Islamic banking. Some countries like
Iran and Sudan offer only Islamic banking while others like Bangladesh,
Egypt, Indonesia, Jordan, Pakistan, Malaysia and Bahrain offer both
Islamic as well as conventional banking (Yusoff and Wilson, 2005).
Leading conventional banks such as Citibank, ABN Amro, Bank of
America, HSBC, Standard Chartered and the Union Bank of Switzerland
have established Islamic banking windows and subsidiaries within their
organizations or provide Islamic banking services to their Muslim and
non-Muslim customers under a dual-banking business model. It can be
said that Islamic banking and finance (IBF) has become a major feature
of global finance (Khan, 2010). It has become a viable and main
competitive alternative to the conventional financial system. It has a
significant market share in the Middle East, Africa and Southeast Asia
(Yahya et al., 2012). In the four decades of Islamic banking, Islamic
banks not only have handled their role as financial institution to facilitate
the processes of resource mobilization, domestic and international
trading, resource allocation and utilization but also were employed in
government monetary policies fulfillment (Haron and Ahmad, 2000).

Islamic Banking in Malaysia

Based on the Malaysian Islamic Banking Act 1983, Islamic banking
is a comprehensive and value-based system that aims to respect and
enhance the moral and material wellbeing of individuals and society in
general (Yahya et al., 2012). Bank Islam Malaysia Berhad (BIMB) was
the first Islamic bank in Malaysia, having been set up on 1 July, 1983.
The Islamic inter-bank Money Market on 3 January, 1994 and Bank
Muamalat Malaysia Berhad (BMMB) on 1 October, 1999 also
incorporated this system in their business under the supervision and
direction of the Malaysian Central Bank, Bank Negara Malaysia (BNM).
In addition, Tabung Haji Malaysia provides services to those interested in
going on a pilgrimage to Makkah. To fulfill their need, it collects and
invests their savings under Islamic laws (Sharīʿah) to be used for their
airfare and accommodation (Yusoff and Wilson, 2005). Thus, Tabung
Haji is a unique Islamic financial institution. Malaysian Islamic banks or
conventional banks providing Islamic counters offer demand and saving
deposits under the guaranteed custody concept (wadīʿah) and investment
deposit accounts as profit sharing (muḍārabah). In addition, Islamic
 
76 Cheng Fan Fah and Abbas Hassani 

banks are not authorized to conduct business in long- and short-term

bonds that are related to interest, debt and preference shares.

According to BNM, the total assets of Malaysian Islamic banks are

about USD 65.6 billion with an average growth rate of 18 to 20 percent
annually (Yahya et al., 2012). In BNM’s view, Islamic banking in
Malaysia sets a higher standard for investments and creates better
accountability and risk reduction. Based on their current potential,
Malaysian Islamic banks are in line to be the leaders of world Islamic
banking in the near future.

Because of its importance and sensitivity, the performance of the

banking sector is of interest to beneficiaries including depositors,
investors, bank management, government and regulators, researchers and
economists who want to assess fiscal conditions and economic health.
Estimated results of bank profitability and performance can be a signal
for investors and depositors to make their decisions to invest or to
withdraw their funds from banks. It also works as a feedback for bank
managers in deciding to continue or alter current operations, correct
weaknesses or follow opportunities. Indeed, banks might encounter
irreparable damage if bank managers do not have sufficient knowledge of
factors significant to banking and the magnitude of their effect on the
banks’ performance. Imminent demands and deferred loans due to
unstable investments and less creditworthy borrowers can take a toll on a
banks’ allocation of resources and financing.

The main purpose of this study is to present an in-depth comparison

of the profitability of two kinds of banking system in a country in which
both systems are operating side by side with intense competition with one
another. The research studies the volume and volatility of loans and
deposits as two determinant factors of profitability. The study also
attempts to examine the existence of a relationship between volatility of
loans, volume of loans, volatility of deposits and volume of deposits and
the profitability of Islamic banks and conventional banks. In addition, the
study investigates how these important variables impact on the
profitability of these two kinds of banking system, whether positively or
negatively. The study focuses on a period of time when the world was
caught up with economic and political problems due to excessive debt
creation. It is hoped that results of this comparative study of the
 
 A Study of Islamic and Conventional Banks in Malaysia 77 

performance of Islamic and conventional banks will help bank managers,

regulators and researchers to make right decisions for the future.

2. Literature Review
The comparison of the conventional and Islamic banking systems, with
regards to their performance, profitability, efficiency, and stability has
been an interesting topic for researchers since the beginning of Islamic
banking. There are many ideas about which of the banking systems is
more successful. Maximizing profits, based on the classical theory of the
firm, is the main aim for firms, and, therefore, profitability, liquidity and
safety are three important factors that conventional banks must consider.
Because of their similarity of operations, Islamic banks should also
consider these three principles (Haron, 1996). Much of previous research
reveals that Islamic banks have obtained a better rank in profitability than
conventional banks (Kaouther et al., 2011). According to studies relating
to the GCC (Gulf Cooperation Councils), Islamic banks are more
profitable and accordingly, their shareholders’ investments get better
returns in comparison with the shareholders of conventional banks
(Olson and Zoubi, 2008). Also in Malaysia Samad and Hassan (2000)
find that Islamic banks operate better than conventional banks. Islamic
banks are more profitable than conventional banks, with identical balance
sheet figures (Kaouther et al., 2011). Awan (2009), who compared the
profitability of Islamic and conventional banks in Pakistan concluded that
Islamic banks had performed much better than selected conventional
banks in terms of assets management, deposits, financing, investment,
efficiency and quality of services and recovery of loans, and were,
therefore, more profitable. Iqbal and Molyneux (2005) compared across
country sample of Islamic and conventional banks for the period 1990-
2002. They found that in terms of key performance ratios measuring
soundness, effective use of resources, prudence, cost efficiency and
profitability Islamic banks meet, and in several cases surpass,
international standards. They also showed that in the benchmarking
exercise that they conducted for many performance-measuring variables,
Islamic banks outperformed their conventional peers. The results of
Samad and Hassan’s study (2000) comparing the performance of BIMB
(Bank Islam Malaysia Berhad) with conventional banks revealed that
Islamic banks made statistically significant progress on return on assets
(ROA) and return on equity (ROE) from 1984 to 1997. In addition, the
 
78 Cheng Fan Fah and Abbas Hassani 

ROA and ROE did not indicate any significant difference in profitability
(Samad and Hassan, 2000). With an efficient Islamic system, it is
possible to allocate fewer capital resources to the more profitable
operations and contribute towards value creation (Yahya et al., 2012). On
the other hand, profit efficiency indicates how well a bank is anticipated
to perform in terms of profit related to other banks in the same period of
time for producing a similar set of outputs. Hassoune (2002) investigated
Islamic banks’ profitability in an interest cycle and compared ROA and
ROE volatility for both Islamic and conventional banks in Kuwait, Saudi
Arabia and Qatar. He discovered that managers of Islamic banks that
operated on the basis of profit and loss sharing, must consider providing
proper returns to depositors because they are not interested to invest with
them just yet (Hassoune, 2002).

To examine the above-mentioned ideas on whether in Malaysia

Islamic banks are actually more successful than conventional banks, this
study compares the profitability of Islamic banks against that of
conventional banks in terms of volume and volatility of deposits and
loans over a six-year period (2006 to 2011).This paper will first consider
some of the literature on the deposits of Islamic and conventional banks
and then look at the literature on loans.

In view of the fact that interest rate is another important factor for
bank depositors and that it is forbidden by Islam, Islamic banks provide
some new kind of deposit accounts compatible with Sharīʿah precepts.
Four main fund sources in Islamic banking are demand deposits
(wadīʿah), saving deposits (wadīʿah), investment deposits (muḍārabah)
and shareholders’ funds (Yahya et al., 2012).On his part, Haron (1996)
states that Islamic banks, like conventional banks, offer three facilities to
their depositors; current, savings and investment accounts. Depositors
who hold current accounts are allowed to withdraw their funds without
notice, but they do not receive any profit on these accounts. Nevertheless,
these accounts are guaranteed by Islamic banks. Haron continues with a
description of saving accounts as administered by Islamic banks.
Rewards are based on Sharīʿah principles. Investment accounts are
another facility offered by Islamic banks where the pre-determined
interest rate is similar to that of fixed deposit or time deposit accounts
offered by conventional banks.

 
 A Study of Islamic and Conventional Banks in Malaysia 79 

Because of the different system of return payment, some researchers

claim that Islamic banks are more profitable and suitable for depositors
while others disagree. Islamic banks in Malaysia show a higher level for
return on asset and profit margin as opposed to conventional banks
(Rosly and Bakar, 2003). Metwally (1997) claims that Islamic banks and
conventional banks are not different in terms of the ratios of gross
income to assets and the return on deposits. Also, both offer depositors
the same returns. Olson and Zoubi (2008) declare that the profit from
Islamic saving deposit accounts depends on future profit but, in fact, the
expected amounts are not different and have the same maturity
conditions as offered by conventional banks. They also apply different
ratios based on five indicators, namely, profitability, efficiency, assets
quality, liquidity and risk as seen in Islamic and conventional banks in
the GCC region. Olson and Zoubi (2008) argue that although there are
many similar ratios between Islamic and conventional banks, Islamic
banks are more profitable than conventional banks in terms of
profitability ratios, return on assets (ROA), return on equity (ROE), profit
margin (PM), return on deposits (ROD) and return on shareholders’
capital (ROSC), which are used in this study. Chong and Liu (2009) and
Olson and Zoubi (2008) confirm that liquidity surplus has negative
effects on bank profitability and Islamic banks hold more cash relative to
assets and their deposits (Kaouther et al., 2011). There is a significant
relationship between the rate of deposit return of Islamic banks and the
interest rate of conventional banks, meaning that Islamic banks have to
follow suit and adapt their rate when the interest rates of conventional
banks rise (Usman and Khan, 2012). Haron and Ahmed (2000) argue that
there is a significant relationship between the interest rate of
conventional banks’ deposits and the rate of profit on Islamic banks’
deposits, a relationship they investigated using an adaptive expectation
model based on Malaysian banks. They found that Malaysian Muslim
customers have a different view of conventional banks’ interest rates,
seeing the rate of return of Islamic banks as interest-free (Haron and
Ahmad, 2000). They also argue that interest rate has a positive impact on
savings in banks, meaning that customer-saving behavior is influenced
by the profit maximization theory. In general, the volume of banks’
deposit growth is affected by changes in real Gross Domestic Product
(GDP), conventional banks’ deposits interest rate and the profit-share
rate of saving and investments in Islamic banks (Yusoff and Wilson,
2005). They also claim that based on Hassan’s (1996) study into the
 
80 Cheng Fan Fah and Abbas Hassani 

behavior of demand for money in 15 Islamic countries, interest-free money

demand deposits are seen to be more stable than interest-based deposits.

Awan (2009), based on results of a study done by Bashir and Hassan

(2004) related to the investigation and impact analysis of factors that
affect efficient performance and profitability of Islamic banks in eight
Middle East countries from 1993 to 1998, considered performance
indicators such as Non-Interest Margin (NIM), Profit Before Tax (PBT),
Return On Assets (ROA) and Return On Equity (ROE) and believes that
Islamic banks’ profitability is affected by equity and loans positively.
This means that profitability will be high if loans and equity are high.
From his analysis; he concluded that Islamic banks were more profitable
than the conventional banks. However, he warned that internal and
external variables and the effects of favorable macroeconomic conditions
in that area should not be ignored. He also refers to Bashir and Hassan’s
(2004) study on the profitability of Islamic banks in 21 countries between
1994 and 2001, which confirmed that capital has a positive while loans’
volume has a negative relationship with the profitability of Islamic banks.
Furthermore, total assets have a negative relationship with profitability,
as smaller banks seem more profitable in an economic boom and,
therefore, loan losses and inflation are low.

The profitability of Islamic banks can be supported by higher capital

ratios; however, total loans have a positive relationship with profitability
in conventional and Islamic banking, and indicate that lending increases
banks’ profitability. On the other hand, deposits have different effects on
the profitability of Islamic and conventional banks. Whereas deposits
volume have positive effects on conventional banks’ profitability, it has
negative effects on Islamic banks’ profitability (Alkassim, 2005). The
profitability of financial institutions enhances the effect of cost efficiency
and improves their competitiveness capability in the market (Iqbal and
Molyneux, 2005). In agreement with this argument, Fadzlan and Noor
(2008) find a positive correlation between bank efficiency and loan
intensity, size, capitalization and profitability.

Usman and Khan (2012) state that Islamic bank financing will be
more expensive compared with that of conventional banks when interest
rate has a downward trend. They also argue that since Islamic banks
work on interest-free basis, they are restricted when faced with interest
 
 A Study of Islamic and Conventional Banks in Malaysia 81 

rate fluctuation. Therefore, short-term investment can create high credit

growth and affect profitability of Islamic banks (Usman and Khan,
2012).

To conclude, in spite of the fact that many researchers have attempted

to analyze banking and its concepts, because of its special and vital role
in the economy and also for a variety of issues and opportunities facing
this growing industry, more research is needed to find new approaches to
convert weaknesses to strengths of this sector.

3. Research Methodology and Sample Selection

The relevant data needed for this study were taken from the
Bankscope database and annual reports of selected banks for six years
(from December 2006 to December 2011). Based on available
information from Bankscope and the central bank of Malaysia, (BNM),
we report that there are currently 138 active financial institutions and
banks in Malaysia, 16 of which are operating either intrinsically and
independently as Islamic banks or they are Islamic sections of a
conventional bank such as is the case with Citibank and Standard
Chartered Bank. Sixteen conventional banks were also chosen from the
list of 47 commercial banks in Malaysia to be compared with the same
number of Islamic banks.

Islamic banking is a new financial system and, therefore, in some

cases, complete data are not available. This is a limitation in this study.
In addition, several Islamic banks have existed for fewer than five years,
but this research investigates banks’ profitability over a six-year period
between 2006 and 2011in Malaysia. Table 1 and 2 show respectively the
Islamic and conventional banks chosen for this study:

 
82 Cheng Fan Fah and Abbas Hassani 

Table 1: Sample of Islamic Bank (2011)

Country World Total Assets
Islamic Banks ranked by ranked by USD
 
assets. assets. (millions)
1 Maybank Islamic Berhad 8 761 21,826.85
2 CIMB Islamic Bank Berhad 16 1,076 13,565.55
3 Bank Islam Malaysia Berhad 19 1,313 10,131.10
4 Public Islamic Bank Berhad 20 1,389 9,260.31
5 RHB Islamic Bank Berhad 21 1,603 7,126.66
6 AmIslamic Bank Berhad 22 1,681 6,672.46
7 Bank Muʿāmalāt Malaysia Berhad 23 1,776 6,049.67
8 Hong Leong Islamic Bank Berhad 24 2,238 4,031.98
9 Affin Islamic Bank Berhad 28 2,457 3,314.79
10 HSBC amānah Malaysia Berhad 29 2,489 3,209.76
Kuwait Finance House (Malaysia)
11 31 2,500 3,191.28
Berhad
12 Alliance Islamic Bank Berhad 36 3,174 2,056.61
Al Rajhi Banking and Investment
13 38 3,312 2,050.00
Corporation Berhad
14 OCBC Al-Amin Bank Berhad 40 3,415 1,797.32
15 Standard Chartered Saadiq Berhad 44 4,005 1,869.00
16 Asian Finance Bank Berhad 55 5,467 748.00
Source: Authors’ Selection.

Hypotheses
Based on previous literature and studies, this section introduces
hypotheses associated with this study’s objectives and criteria for
acceptance or rejection of these hypotheses for making reliable
conclusions.
Hypothesis 1. Conventional banks’ volatility of deposits is
significantly different from Islamic banks’ volatility of deposits.
Hypothesis 2. Conventional banks’ volume of deposits is
significantly different from Islamic banks’ volume of deposits.
Hypothesis 3. Conventional banks’ volatility of loans is significantly
different from Islamic banks’ volatility of loans.
Hypothesis 4. Conventional banks’ volume of loans is significantly
different from Islamic banks’ volume of loans.

 
 A Study of Islamic and Conventional Banks in Malaysia 83 

Table 2: Sample of conventional banks (2011)

Total
Country World
Assets
Conventional Banks rank by rank by
  USD
assets. assets
(millions)
1 Malayan Banking Berhad - Maybank 1 172 136,387.59
2 Public Bank Berhad 2 261 78,505.19
3 CIMB Bank Berhad 3 281 73,783.44
4 Hong Leong Bank Berhad 4 396 48,145.90
5 RHB Bank Berhad 5 452 45,006.17
6 AmBank (M) Berhad 6 659 26,895.67
7 HSBC Bank Malaysia Berhad 7 690 25,094.40
8 United Overseas Bank (Malaysia) Bhd. 10 771 21,648.44
9 OCBC Bank (Malaysia) Berhad 11 812 20,270.95
Standard Chartered Bank Malaysia
10 14 972 15,530.85
Berhad
11 Affin Bank 15 973 15,501.48
12 Alliance Bank Malaysia Berhad 18 1,175 11,910.60
13 Maybank International (L) Ltd 27 2,413 3,439.20
14 Citibank Malaysia (L) Ltd 34 2,843 3,213.00
15 Bank of Nova Scotia Berhad 42 3,665 1,559.95
16 Bangkok Bank Berhad 54 5,173 1,016.00
Source: Authors’ Selection

In Malaysia, the instruments and facilities of Islamic banks and

conventional banks operate side by side, and Malaysian Islamic banks
aim to be the pivot of Islamic financing in the world. Therefore, it is
important to identify their probable differences and to examine which
one can produce more efficient (profitable) performance. In line with this
objective the next hypothesis can be stated as:

Hypothesis 5. In Malaysia, conventional banks’ profit efficiency

(profitability) is significantly different from Islamic banks’ profit
efficiency.

4. Methodology

According to this framework, the linear model (regression equation) is

used to drive the cross-sectional time series data to define and portray
how variables are related to each other and to compare the profitability
level of Malaysian banks (conventional as well as Islamic).
 
84 Cheng Fan Fah and Abbas Hassani 

The basic regression equation is as follows:

Y = ƒ (X1, X2, X3, X4, X5) (1)
Model 1- ROA
ROAbt = α1 + β1X1 + β2X2 + β3X3 + β4X4 + β5X5 + ε (2)

Model 2- ROE
ROEbt = α2 + β1X1 + β2X2 + β3X3 + β4X4 + β5X5 + ε (3)

Where:
Y represents the profitability of banks, which is measured by ROA
and ROE ratios.
X1 is representative of volatility of bank deposits that is measured by
calculating the standard deviation of the volume of deposits during 2006-
2011.
X2 is the volume of bank deposits that is measured by proportion of
total bank deposits divided by total assets of banks for each financial
year.
X3 represents the volatility of bank loans that is measured by calculating
the standard deviation of the volume of loans during 2006-2011.
X4 is the volume of bank loans as asset composition that is measured
by proportion of total loans divided by the banks’ total assets for each
financial year.
X5 is a dummy variable that is utilized as an auxiliary variable in this
method, and it is identified for Islamic banking system by 0 and non-
Islamic banking system by 1.
In addition, α1 and α2 are intercepts (constants items); β1, β2, β3, β4 and
β5 are coefficients of variables, and Ɛ is the error term. The results are
presented in the next section.

5. Findings

Descriptive Statistics
As explained, sampled data are from the BankScope database and
financial statements of 16 Islamic and 16 conventional banks in Malaysia.
 
 A Study of Islamic and Conventional Banks in Malaysia 85 

Tables 3 and 4 provide descriptive statistics of variables for the two

samples, conventional and Islamic banks, respectively, in terms of mean,
median, maximum, minimum, standard deviation, skewness, and
kurtosis. The total number of observations for each variable in this study
is 96, which are formed in a panel of 16 cross sections (banks number)
and a time series of six years from 2006 to 2011. The Islamic banks
sample contains some missing data in the panel because some of the
banks are not independent banks or particular department of a
conventional bank that deal with Islamic principles. In addition, data are
based on yearly financial accounting results.

The definition of ratios, variables and method was discussed in

section three. Therefore, this section briefly explains descriptive
characteristics of the variables. Tables 3 and 4, show some commonly
used descriptive statistics for both conventional and Islamic banks. For
profit-efficiency comparison, it is pertinent to note that the maximum for
the figures of ROE and ROA for conventional banks in Malaysia is 37.13
and 1.99 and for Islamic banks, 29.53 and 1.72, while the minimum is -
14.29 and -0.85 for conventional banks and - 4.87 and -1.24 for Islamic
banks.

Table 3: Descriptive statistics for the conventional banks

Volatility
Volume of Volume of Volatility ROE ROA
of
loans deposits of loans
deposits
(Billions) (Billions) % % %
%
Mean 58.72 70.00 5.07 5.15 14.39 1.01
Median 59.65 74.68 4.65 4.07 14.92 1.12
Maximum 75.74 90.20 11.37 9.80 37.13 1.99
Minimum 31.69 10.55 1.78 1.41 -14.29 -0.85
Std. Dev. 9.36 14.05 2.91 2.57 8.40 0.48
Skewness -0.61 -2.33 0.89 0.29 -0.53 -1.43
Kurtosis 3.15 8.66 2.62 1.68 5.13 6.69
Number of
96 96 96 96 96 96
observations
Source: Authors’ Calculations.

 
86 Cheng Fan Fah and Abbas Hassani 

Table 4: Descriptive statistics of the Islamic banks

Volume of Volume of Volatility Volatility of
ROE ROA
loans deposits of loans deposits
% %
(Billions) (Billions) % %
Mean 51.77 66.576 10.502 14.07 9.04 0.63
Median 55.92 71.713 7.542 10.98 8.23 0.58
Maximum 77.73 92.085 28.267 29.44 29.53 1.71
Minimum 16.35 26.234 1.291 3.25 -4.87 -1.24
Std. Dev. 17.93 20.667 7.848 9.96 6.67 0.54
Skewness -0.79 -1.358 1.089 0.40 0.51 -0.57
Kurtosis 3.30 4.772 3.185 1.46 3.33 4.42
Number of
79 79 79 79 79 79
observations
Source: Authors’ Calculations.

The standard deviation shows the dispersion or variations from the

mean of the variables. A low standard deviation means that the data
points are close to the meanwhile a high standard deviation means that
data points are dispersed over a large range of the average. In this study,
the variables’ standard deviations for both types of banks are not high,
meaning that the data are dispersed relatively close to the mean and their
dispersion is normal.

In addition, the skewness and kurtosis indicate the normality of data

distribution for running the model. Skewness results are interpreted to
identify the symmetry of data distribution. A positive skewness value
reflects the degree to which the scores are clustered to the left at a low
value, while a negative skewness value indicates that the scores are
clustered at the high end. Skewness value in a range between -3 and +3 is
an accepted value; hence, based on the information given in the tables
above, skewness values for all variables in both types of banks can be
seen to be within the acceptable range. The skewness for volume of loans
in conventional and Islamic banks is, respectively, -0.61 and -0.79, while
volume of deposits is -2.33 and -1.36; volatility of loans 0.89 and 1.08;
volatility of deposits 0.29 and 0.39; ROE -0.54 and 0.51; and ROA -1.43
and -0.57; all are inside the acceptable range.

Another descriptive statistic indicator is kurtosis, which represents the

peakedness of the probability distribution of a real-valued random
variable and is related to the concentration of the scores in the center. A
 
 A Study of Islamic and Conventional Banks in Malaysia 87 

normal distribution will have a kurtosis value of zero. So a range of

normality is in positive and negative range around zero. In particular, a
positive kurtosis value shows that the distribution is peaked where the
scores have a long tail and are clustered in the center. However, a
kurtosis value is negative when the distribution of scores is flat, and the
data set contains many extreme cases. Normally, a kurtosis value ranging
from -7 to +7 is considered acceptable. Accordingly, almost all the data
sets applied in this study lie within the normal range.

Panel Linear Regression Analysis

This section applies regression analysis in order to firstly, analyze
Islamic and conventional banks’ data separately to examine the impact of
volume and volatility of loans and deposits on ROE and ROA of both
banks. Furthermore, the model applied in this study uses an additional
dummy variable to analyze the profitability of both conventional and
Islamic banks together. As mentioned in the previous section, the data
used in this study are in panel form, using a cross section of 16 Islamic
and 16 conventional banks in a six-year period from 2006 to 2011 in the
Malaysian context. The results related to each dependent variable, ROE
and ROA are displayed in Tables 5 and 6, for conventional and Islamic
banks respectively.

Based on Table 5, column 2, which displays the relationship between

independent variables and ROE for the sample of conventional banks,
F-statistic 3.54 reflects an acceptable level of significance in defining the
correlation among the variables. The p-value denoted as the probability
(F-statistic) is close to zero and represents a high significance level. The
R-squared (R2) statistics used to measure and explain the success of the
estimated value of dependent variables in the sample is more than 13
percent. Moreover, the volatility of deposits in conventional banks has a
negative and significant relation with profitability. Other independent
variables are not significantly related with ROE.

In terms of ROA, another representative of profit efficiency, Table 5,

column 3, illustrates that the F-statistic is not high; the probability statistic
is not significant and just 5 percent of ROA’s changes are explained by the
independent variables. Eventually, volatility of deposits is negatively
related with ROA in conventional banks only.

 
88 Cheng Fan Fah and Abbas Hassani 

Table 5: Regression Results for ROA and ROE with Volume and
Volatility of Loans and Deposits
Conventional Bank Islamic banks
Variables ROE ROA ROE ROA
Constant 4.3865 0.8145 -2.996 -0.640
(t- stat) (0.441) (1.369) (-0.867) (-2.474)
(p-value) (0.659) (0.174) (0.388) (0.015)
Vol. L 0.0479 0.00736 0.0581 0.0121
(t- stat) (0.520) (1.334) (1.414) (3.958)
(p-value) (0.603) (0.185) (0.161) ***(0.000)
Vol. D 0.1393 -0.0006 0.1268 0.0093
(t- stat) (1.789) (-0.130) (3.407) (3.339)
(p-value) *(0.077) (0.896) **(0.001) **(0.001)
Volat. L 0.4936 0.0037 -0.0902 -0.0034
(t- stat) (1.368) (0.172) (-0.896) (-0.452)
(p-value) (0.1745) (0.863) (0.372) (0.652)
Volat. D -0.9826 -0.0404 0.1134 0.0048
(t- stat) (-2.815) (-1.936) (1.346) (0.768)
(p-value) **(0.006) (0.055) (0.182) (0.444)
R-square 0.135 0.056 0.211 0.340
3.54 1.351 4.975 9.530
F stat
**(0.010) (0.256) **(0.001) ***(0.000)
Included observations: 96 Included observations: 79
Source: Authors’ Calculations.

Table 5, column 4, shows the relationship between the independent

variables and ROE in Islamic banks; it reveals that the volume of
deposits has a positive and significant relationship with ROE among the
Islamic banks, while the F-statistic is 4.97, which is significant. The
probability of F-statistics is close to zero, and the independent variables
explain 21 percent of the dependent variable's changes.

Table 5, column 5, shows the relationship between ROA and volume

and volatility of loans and deposits in Islamic banks. The F-statistics and
the probability of F-statistics are both significant, and the R-squared is
0.34, meaning that in this model 34 percent of ROA’s changes are
explained by the independent variables’ changes, whereas volume of
loans and deposits have a positive significant relation with ROA.

 
 A Study of Islamic and Conventional Banks in Malaysia 89 

Finally, the combination data of Islamic and conventional banks,

besides using a dummy variable, is analyzed to investigate the
relationship between the profitability level of banks and their volume and
volatility of loans and deposits. The results are illustrated in Tables 6.

The information in Table 6, column 2, shows that the F-statistic is

8.20. This means that the model is significant at 0.000 level. The R2
value is 0.1952 which means that 20 percent of the changes in the
dependent variable are defined by the changes in the independent
variables.

The dependent variable, ROE, as a representative of profitability of

both Islamic and conventional banks, is significantly related to volume of
customer deposits and the dummy variable has a positive trend and with
coefficients 0.13 and 4.61 respectively. This means that an increase in
volume of deposits will push the profitability of Malaysian banks
upward. In addition, the probability value of the dummy variable is less
than 0.05, which implies that Islamic and non-Islamic banks show a
significant difference in impact of the related independent variable, that
is, volume of customers’ deposits in banks, on ROE.
Other independent variables are related to ROE but insignificantly;
the volume of loans and volatility of deposits are affected positively
while volatility of loans is affected negatively. The negative relationship
between ROE and volatility of loans means that increasing volatility of
bank loans diminishes the magnitude of ROE, that is, the profitability of
banks and vice versa.

Table 6, column 3 displays the results of regression analysis related to

the ROA. The F-statistic is 12.13; meaning that the data set has a
significant fit in this model. Probability of F-statistic is zero and confirms
a high significant level of the F-test. The R2 value is 0.26; that is, 26
percent of dependent variable changes are affected by changes to the
independent variables.

 
90 Cheng Fan Fah and Abbas Hassani 

Table 6: Regression Result for Both Conventional and Islamic banks

with Dummy variable (1= conventional, 0= Islamic).
Variables ROE ROA
Constant -2.705 -0.408
(t- stat) (-0.711) (-1.674)
(p-value) (0.477) *(0.096)
Vol. L 0.057 0.012
(t- stat) (1.391) (4.598)
(p-value) (0.166) **(0.000)
Vol. D 0.129 0.006
(t- stat) (3.627) (2.814)
(p-value) **(0.001) ***(0.006)
Volat. L -0.011 -0.001
(t- stat) (-0.096) (0.113)
(p-value) (0.923) (0.910)
Volat. D 0.0219 -0.0004
(t- stat) (0.234) (-0.071)
(p-value) (0.815) (0.942)
Dummy 4.608 0.2578
(t- stat) (3.265) (2.845)
(p-value) **(0.001) **(0.005)
R-square 0.1952 0.2641
8.198
F stat 12.13 ***(0.000)
***(0.000)
Included observations: 175
Source: Authors’ Calculations.

As seen in the regression analysis provided in Table 6, volume of

loans, volume of deposits and the dummy variable are significantly and
positively related to the ROA. On the other hand, both volatility of loans
and volatility of deposits are negatively related and are insignificant.
Again, it reveals that impacts of determinants of independent variables on
ROA (bank profitability) are significantly different between Islamic and
conventional banks in Malaysia.

Test of compare Mean (t- test Statistics)

This section utilizes independent t-test statistic analysis under the related
null hypotheses with the aim of testing hypotheses 1 to 4 to examine the
significant differences between means of variables corresponding to
conventional and Islamic banks. The results are portrayed in two parts,

 
 A Study of Islamic and Conventional Banks in Malaysia 91 

first in Tables 7 and 8, which present results for independent variables,

including volume of deposits, volume of loans, volatility of deposits,
volatility of loans, and secondly, in Tables 9 that show the results of
analyzing data for dependent variables ROA and ROE.

Table 7: Descriptive statistics of Volume and Volatility of Deposits,

Loans, ROA and ROE
Std. Std.
Group N Mean
Deviation Error
Islamic 79 66.57 20.667 2.282
Volume of deposits
Conventional 96 70.00 14.048 1.433
Islamic 79 51.77 17.937 1.980
Volume of loan
Conventional 96 58.72 9.360 0.955
Islamic 79 14.06 9.958 1.043
Volatility of deposits
Conventional 96 5.15 2.574 0.262
Islamic 79 10.50 7.849 0.822
Volatility of loan
Conventional 96 5.07 2.917 0.297
Islamic 79 0.63 0.546 0.061
ROA
Conventional 96 1.01 0.482 0.049
Islamic 79 9.04 6.678 0.751
ROE
Conventional 96 14.39 8.404 0.857
Source: Authors’ Calculations.

Table 7 shows that the means of volume and volatility of deposits and
loans for Islamic and conventional banks are different. The means for
volume of deposits are 6.58 and 70, volume of loans, 51.78 and 58.72,
volatility of deposits, 14.07 and 5.16 and volatility of loans, 10.50 and
5.07 for Islamic and conventional banks, respectively.

Table 8 shows the independent t-test for means. The significant levels
for all variables are zero except for volume of deposits, implying that the
means are different. Sig.(2-tailed) or p-value for t-test distribution related
to volume of loans, volatility of deposits and loans is less than 0.05;
which means that conventional banks’ volume of loans, volatility of
deposits and loans are statistically and significantly different from those
of Islamic banks, but volume of deposit is not different in conventional
and Islamic banks.

 
92 Cheng Fan Fah and Abbas Hassani 

Table 8: Independent Samples t-Test for Volume and Volatility of Loans

and Deposits
Equality of t-test for Equality of
Variances Means
Std. Error
F Sig. t Sig.
Difference
Volume of Equal variances
12.29 0.001 -1.27 0.21 2.70
deposits not assumed
Volume of Equal variances
38.57 0.00 -3.16 0.00 2.20
loans not assumed
Volatility of Equal variances
232.49 0.00 8.28 0.00 1.08
deposits not assumed
Volatility of Equal variances
64.40 0.00 6.20 0.00 0.88
loans not assumed
Source: Authors’ Calculations.

Table 9 shows the independent t-test for ROA and ROE of Islamic
and conventional banks. The results show that the Sig. (2-tailed) are zero
and significant; hence, there is a significant difference between the ROA
and ROE ratios as profitability indicators among conventional and
Islamic banks. The related hypothesis is effectively supported by this
statistic analysis.

Existing differences between ROE and ROA in conventional and

Islamic banks are indicated in Table 7 and 9. The means of conventional
banks are 1.01 and 14.40, and the means for Islamic banks are 0.64 and
9.04 for ROA and ROE, respectively.

Table 9: Independent Samples t-Test for ROA and ROE

Equality of
t-test for Equality of Means
Variances
  Std. Error
F Sig. t Sig.
Difference
Equal variances
ROA 1.42 0.23 4.83 0.00 0.08
assumed
Equal variances
ROE 0.92 0.34 4.59 0.00 1.17
assumed
Source: Authors’ Calculation.

 
 A Study of Islamic and Conventional Banks in Malaysia 93 

This shows that the ROA and ROE for conventional banks are higher
than those for Islamic banks. This implies that while ROA and ROE,
which in this study are noted as profitability benchmarks, distinguish
between these two types of banks. In other words, conventional banks in
Malaysia were more profitable than Islamic banks during 2006-2011.

The above results suggested that the volume of deposits and volume
of loans have a significant correlation with ROA. Volume of loans and
deposits are positive determinant factors that affect banks’ profitability
while other variables like volatility of deposits and loans do not have a
significant impact on banks’ profitability in Malaysia.

6. Conclusions
This study looked into the impact of important internal factors on the
banking industry’s profit efficiency in Malaysia with the aim of finding
an answer to the question: which banking system was more profitable
during 2006-2011; Islamic or conventional? In this study, volume of
loans, volatility of loans, volume of deposits and volatility of deposits as
independent variables have been investigated to discover how and how
much they correlate with dependent variables ROA and ROE, which
represent the profitability of banks. The study utilized secondary data
collected from the Bank Scope database and financial statement
information recorded on the websites of individual banks. This study
used a sample of 16 Islamic and 16 conventional Malaysian banks. Five
hypotheses were identified and considered to examine the relationships
between variables and profitability of banks and also the differences
between the variables of Islamic and conventional banks. The study used
regression analysis to measure the relationship between independent and
dependent variables.

The results obtained from this study confirm a statistically significant

model including and measuring the data (as identified by F-statistic and
Prob, F-statistic). In addition, it was found that the R2 of the regression
model for both ROA and ROE has a relatively strong explanatory power.
These results also show that a couple of independent variables are
positively correlated with the dependent variables, meaning that there is a
positive and significant relationship between volume of loans and volume
of customers’ deposits, with profitability of banks. Other independent

 
94 Cheng Fan Fah and Abbas Hassani 

variables are insignificantly correlated with the dependent variables, ROA

and ROE. In other words, volatility of loans and volatility of deposits do
not have a significant impact on banks’ profit efficiency in Malaysia;
however, they are important indicator factors in the banking system.

In addition, the t-test analysis is employed with the aim of comparing

both type of banks’ variables and their profitability levels. The results of
this analysis reveal that Malaysian conventional banks were more
profitable than Islamic banks during 2006-2011, whereas ROA and ROE
were significantly different and the mean of ROA and ROE in
conventional banks were higher than those in Islamic banks. On the other
hand, the t-test results indicate that conventional and Islamic banks are
also different in terms of the effects of independent variables such as
volume of loans, volatility of deposits and loans but they are the same in
terms of volume of deposits. This is contrary to the findings of previous
research that claims that Islamic banks are more profitable or equally
profitable as conventional banks. Samad and Hassan (2000), for instance,
examined different performance measurements and compared the
performance of BIMB (Bank Islam Malaysia Berhad) with that of a
group of conventional banks, and they argue that ROA and ROE did not
show any significant difference in the performance of Islamic and
conventional banks during 1984-1997.

This study stresses only on profit-efficiency and assesses only two

types of profitability ratios (ROA and ROE) related to some limited
internal factors such as volume of loans, volume of deposits, volatility of
loans and volatility of deposits. Three groups may benefit from the
results of this study: banks managers, investors and government
regulators who may utilize the results of this study to enhance their
performance and improve their decision-making.

Since the main part of banks’ profits comes from the spread between
the interest earned on loans and the return payable to customer deposits,
both internal factors, volume of loans and volume of deposits, are
significantly influenced by banks’ profitability. This is confirmed by the
results of this study. Therefore, managers and bank administrators,
whether Islamic or conventional, should focus their attention on these
two determinants and adopt policies that lead banks to enhancing their
volume of loans and deposits to boost bank profitability.
 
 A Study of Islamic and Conventional Banks in Malaysia 95 

On the other hand, Islamic bank managers should identify weaknesses

in their system that led to lower profits than conventional banks, and
improve on them. Islamic bank managers also need to improve their
knowledge of Islamic financing and their understanding of various
aspects of Sharīʿah principles in order to increase their skills in using
Islamic instruments because Islamic instruments essentially have the
potential to cover all customer needs and preferences and can also help
them coping with conventional instruments as a reliable substitute. As a
result, they can attract more Islamic investors with huge resources who
prefer to invest in Islamic financial institutions that are Sharīʿah-
compliant. Because they are not aware of the instruments and features of
Islamic banking and its benefits, it becomes the duty of Islamic banks to
inform and attract them.

If the Malaysian government and financial regulators of the country

care to transform Malaysia into an Islamic financial center, they should
develop and improve the Islamic banking system and also educate people
in order to not only view Islamic banking as a religious concept but also
as a complete financial system that has different, unique and practicable
capabilities.

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‫‪98‬‬ ‫‪Cheng Fan Fah and Abbas Hassani ‬‬

‫دراﺳﺔ اﻟﺑﻧوك اﻹﺳﻼﻣ ﺔ واﻟﺗﻘﻠﯾد ﺔ ﻓﻲ ﻣﺎﻟﯾز ﺎ‬

‫ﺷﯾﻧﺞ ﻓﺎن ﻓﺎﻩ وﻋ ﺎس ﺣﺳﻧﻲ‬

‫ﺟﺎﻣﻌﺔ ﺑﺗ ار اﻟﻣﺎﻟﯾزﺎ‬
‫‪chengfanfah@upm.edu.my, abbash55@ymail.com‬‬

‫اﻟﻣﺳﺗﺧﻠص‪ .‬دأب ﺛﯾر ﻣن اﻟﻌﻠﻣﺎء ﻋﻠﻰ إﺟراء اﻟ ﺣوث ﻣن ﺣﯾن ﻷﺧر‬

‫ﻟﻠﻣﻘﺎرﻧﺔ ﺑﯾن اﻧظﻣﺔ اﻟﺑﻧوك اﻹﺳﻼﻣ ﺔ واﻟﺗﻘﻠﯾد ﺔ ﻓ ﻣﺎ ﯾﺗﻌﻠ ﺄداﺋﻬﺎ‪ .‬ﻫذﻩ‬
‫اﻟدراﺳﺔ ﺗﻘﺎرن ﺑﯾن رﺣ ﺔ ﻞ ﻣﻧﻬﻣﺎ ﺣﺳب ﺣﺟم وﺗﻘﻠب إﯾداﻋﺎﺗﻬﺎ‬
‫وﻗروﺿﻬﺎ ﻓﻲ ﻣﺎﻟﯾزﺎ ﺧﻼل ﻓﺗرة ﺳت ﺳﻧوات )‪٢٠١١-٢٠٠٦‬م( وﻫﻲ‬
‫ﺟواﻧب ﻟم ﯾﺗطرق إﻟﯾﻬﺎ اﻟﻛﺗﺎب اﻵﺧرون ﺷ ﻞ ﻣﻔﺻﻞ‪ .‬وﺗﺷﯾر ﻧﺗﺎﺋﺞ ﻫذﻩ‬
‫اﻟدراﺳﺔ إﻟﻰ وﺟود ﻋﻼﻗﺎت إﯾﺟﺎﺑ ﺔ وﻣﻌﻧو ﺔ ﺑﯾن ﺣﺟم اﻟﻘروض وﺣﺟم‬
‫اﯾداﻋﺎت اﻟﻌﻣﻼء ورﺣ ﺔ اﻟﺑﻧوك‪ .‬وﻣﻊ ذﻟك ﻓﺈن اﻟﺗﻘﻠ ﺎت ﻓﻲ اﻟﻘروض‬
‫واﻻﯾداﻋﺎت ﻟ س ﻟﻬﺎ ﺗﺄﺛﯾر ﻣﻌﻧو ﻋﻠﻰ اﻟﻛﻔﺎءة اﻟرﺣ ﺔ ﻟﻠﺑﻧوك اﻟﻣﺎﻟﯾزﺔ‪.‬‬
‫ﻣﺎ ﺗﺷﯾر ﻧﺗﺎﺋﺞ ﻫذا اﻟ ﺣث إﻟﻰ أن اﻟﺑﻧوك اﻟﺗﻘﻠﯾد ﺔ ﻣﺎﻟﯾزﺎ ﺎﻧت أﻛﺛر‬
‫رﺣ ﺔ ﻣن اﻟﺑﻧوك اﻹﺳﻼﻣ ﺔ ﺧﻼل ﻓﺗرة اﻟدراﺳﺔ‪ .‬ﻣﺎ أن اﻟﻌﺎﺋد ﻋﻠﻰ‬
‫اﻷﺻول واﻟﻌﺎﺋد ﻋﻠﻰ ﺣﻘوق اﻟﻣﺳﺎﻫﻣﯾن ﻣﺧﺗﻠﻔﺎن ﻣﻌﻧوًﺎ‪ ،‬ﻣﺎ أن ﻣﺗوﺳط‬
‫اﻟﻌﺎﺋد ﻋﻠﻰ اﻷﺻول وﻣﺗوﺳط اﻟﻌﺎﺋد ﻋﻠﻰ ﺣﻘوق اﻟﻣﺳﺎﻫﻣﯾن ﻓﻲ اﻟﺑﻧوك‬
‫اﻟﺗﻘﻠﯾد ﺔ أﻋﻠﻰ ﻣن ﻣﺛﯾﻠﺗﻬﺎ ﻓﻲ اﻟﺑﻧوك اﻹﺳﻼﻣ ﺔ‪ .‬وﺗﺄﺗﻲ اﻟﻣﺳﺎﻫﻣﺔ‬
‫اﻟرﺋ ﺳ ﺔ ﻷرﺎح اﻟﺑﻧوك ﻣن اﻟﻔرق ﺑﯾن اﻟﻔﺎﺋدة اﻟﻣ ﺗﺳ ﺔ ﻋﻠﻰ اﻟﻘروض‬
‫واﻟﻌﺎﺋد اﻟﻣدﻓوع ﻋﻠﻰ إﯾداﻋﺎت اﻟﻌﻣﻼء‪ .‬و ﻼ اﻟﻌﺎﻣﻠﯾن ﻌﺗﺑران ﻣن‬
‫اﻟﻌواﻣﻞ اﻟداﺧﻠ ﺔ‪ .‬وﻟﻘد ﺗﺑﯾن أن ﺣﺟم اﻟﻘروض وﺣﺟم اﻻﯾداﻋﺎت ﻟﻬﻣﺎ‬
‫ﺗﺎﺛﯾر ﻣﻌﻧو ﻋﻠﻰ رﺣ ﺔ اﻟﺑﻧوك‪ .‬ﻟذا ﯾﺟب ﻋﻠﻰ اﻟﻣدراء واﻹدارﯾن‬
‫اﻟﻌﺎﻣﻠﯾن ﻓﻲ اﻟﺑﻧوك أﻣﺎ ﺗر ﯾز اﻫﺗﻣﺎﻣﻬم ﻋﻠﻰ اﻟﻣﺣددﯾن اﻟﻣذ ورن أو‬
‫ﺗﺑﻧﻲ ﻌض أﻧواع ﻣن اﻟﺳ ﺎﺳﺎت اﻟﺗﻲ ﺳﺗﺳﺎﻋد اﻟﺑﻧوك ﻋﻠﻰ زﺎدة ﺣﺟم‬
‫ﻗروﺿﻬﺎ ٕواﯾداﻋﺎﺗﻬﺎ ﻟرﻓﻊ ﻣﺳﺗو رﺣﯾﺗﻬﺎ‪.‬‬

‫‪ ‬‬
 A Study of Islamic and Conventional Banks in Malaysia 99 

Cheng Fan Fah holds a Ph.D. in Finance and is an associate

professor at the Economics Faculty of the University Putra
Malaysia (UPM). He has published four books titled Bond
Markets in Malaysia and Singapore; Corporate Governance
and Corporate Finance; Issues in Banking and Finance; and
Asian Bond Markets. He has published scholarly articles in
journals such as Advances in Accounting; International
Business Research; Islamic Economics, Global Business and
Finance Review. He has contributed chapters in books
published on capital market behavior. His areas of research
are: corporate finance; banking; and fixed income. He has
taught at the UPM, several other universities (Monash,
Lancaster, Victoria, Taylor and Sunway). He has 20 years of
top senior management experience at the board level prior to
his academic appointment in UPM.
E-Mail: chengfanfah@upm.edu.my

Abbas Hassani obtained an MBA in Finance in 2012 from

University Putra Malaysia. Currently, he is a foreign currency
expert in one of the Iranian commercial banks. He has 18
years’ work experience in banking. His thesis's topic was
“Comparative Study on Volume and Volatility of Deposits
and Loan Level between Conventional and Islamic Banks in
Malaysia from 2006 to 2011.” He is a relatively young writer
in Islamic finance. His areas of research interest are:
corporate finance; international finance; banking affairs and
issues; Islamic banking and organizational behavior.