لخّصلي

With an increasing number of cultural minorities in the West, and the growing importance of emerging markets, banks need to pay more attention to cultural differences.For example, Dridi and Hasan (2010) indicated that Comparing the performance of IBs to CBs globally would suggest that IBs performed better, given the large losses incurred by CBs in Europe and the US as a result of the International financial crisis Moin (2008) conducted a study to analyze the effectiveness of the pioneering bank in IB sector in Pakistan: Meezan Bank Limited (MBL).We compare efficiency and effectiveness of operations of both bank-groups in terms of its return on equity (ROE), return on assets (ROA), and other performance indicators derived from the income statement and balance sheet of

both IBs and CB. This research aims to provide both IBs and CB managers in Oman a basic understanding of the comparative performance and this will be of immense help in formulating their future decisions and competitive financial position.Islamic finance remains concentrated in the Middle East, including Iran, with a share of 35.7% in total Islamic finance assets, Saudi Arabia with 13.9%, United Arab Emirates with 8.7%, Kuwait with 7.3%, Bahrain 5.3%, and Qatar with 4.8% (OIC Outlook Series, 2012).The Shari'a is based on four main sources of law: the Quran, the Traditions of the Prophet and his most faithful companions, the consensus of all Islamic scholars, and deduction by analogy.the buyer and seller but assurance of fixed interest rate, profit maximization theory without any restriction, and lending and receiving money is the main operation of the CB. The study of the comparative performance of IBs and CB is still considered as an important issue in the field of finance and investment.Many studies were undertaken on CB and IB across the world including Awan (2009), Hanif (2011) and Alkassim (2005) Most of the studies focused on comparing CB with IB. Some results reveal that IBs performed better rather than CB, while other results conclude that CB performed better than IBs.The organization of the research is as follows; section (2) discusses and review literature concerning the theoretical and empirical studies of CB and IBs (3) provides a brief about the CB and IBs in Oman.Islamic banking (IB) is growing at a rapid speed and has showed unprecedented growth and expansion in last two decades in spite of mismatching of existing financial framework and business practices.This research too is another attempt to look at a comparative performance evaluation between for IBs and CB in Oman during 2013-2015, we discuss the extent to which CBs and IBs satisfy its various performance indicators.The main objective of the research is to conduct a comparative analysis of the performance for IBs and CB in Oman during 2013- 2015, to find out whether the IBs and CBs are operating efficiently.IB is expected to assume an important role in the financial sector of Oman by complementing the current conventional banking (CB) and thereby diversifying banking services.The researched concluded that MBL was more solvent, less profitable, and less efficient as compared to the median of 5 traditional banks.

With an increasing number of cultural minorities in the West, and the growing importance of emerging markets, banks need to pay more attention to cultural differences. Traditional banks that want to continue doing business with Muslims in the future should change radically, since certain common bank transactions are illegal for Muslims. Examples are spec- ulative transactions or interest-based transactions. In the past, Muslims had no alternative for traditional banks. With the appearance of Islamic banks, Muslims now have that alterna- tive. In this article, I present an overview of the theory of Islamic banking (section III), and its implementation in prac- tice (section IV). I will, however, begin with a section about the Islamic Revival, the roots of the Islamic banking move- ment, and a short subsection about Islamic Law. embodied in millions of edicts from judges and scriptural writings of scholars. The Shari’a developed through different schools of law. Nowadays, four schools of law still exist. They agree on the main subjects, and mutually recognize each other. The Shari’a is based on four main sources of law: the Quran, the Traditions of the Prophet and his most faithful companions, the consensus of all Islamic scholars, and deduction by analogy. For a further discussion of these sources of law, see Schacht (1964).

The importance of banking sector comes from its role in achieving
the financial balance and economic development and growth.
Islamic banking (IB) is growing at a rapid speed and has showed
unprecedented growth and expansion in last two decades in spite
of mismatching of existing financial framework and business
practices. It is estimated that the size of the IB industry at the global
level was close to US$820 billion at end-2008 (Islamic Financial
Services Board et al., 2010). Middle East is the centre of IB with
contribution of approximately 80% while 20% share is contributed
by rest of the world (Hanif, 2011). The GCC countries account
for 40% of the $1.1 trillion global Islamic finance industry with
Islamic finance expanding at a compounded average growth rate
of 26.4% since 2006. Islamic finance remains concentrated in the
Middle East, including Iran, with a share of 35.7% in total Islamic
finance assets, Saudi Arabia with 13.9%, United Arab Emirates
with 8.7%, Kuwait with 7.3%, Bahrain 5.3%, and Qatar with 4.8%
(OIC Outlook Series, 2012).
According to the World IB Competitiveness report published by
Ernst and Young (2012), IB assets with commercial banks globally
grew to $1.3 trillion in 2011, suggesting an average annual growth
of 19% over past 4 years. The IB growth story continues to be
positive, growing 50% faster than the overall banking sector.
The sultanate of Oman is last GCC country initiated IBs. The first
IB was established in 2011. The beginning of IB in the Sultanate
was an important milestone in the process of financial inclusion.
IB is expected to assume an important role in the financial
sector of Oman by complementing the current conventional
banking (CB) and thereby diversifying banking services. There
were two full-fledged locally incorporated IB, namely, Bank
Nizwa and Al Izz IB. Six out of the seven locally incorporated
conventional commercial banks were also offering IB services
through dedicated windows. The IBs and Windows operated
with 29 branches have been started and provide their services to
customers at the begging of January 2013. Central Bank of Oman
Annual Report (2015).
IBs is based on the risk-sharing concept between the investor
and entrepreneur, profit maximization theory based on Shariah
restrictions, and entering into partnership form of business is the
main operation of the IBs. the buyer and seller but assurance of fixed interest rate, profit
maximization theory without any restriction, and lending and
receiving money is the main operation of the CB.
The study of the comparative performance of IBs and CB is
still considered as an important issue in the field of finance and
investment. Many studies were undertaken on CB and IB across
the world including Awan (2009), Hanif (2011) and Alkassim
(2005) Most of the studies focused on comparing CB with IB. Some
results reveal that IBs performed better rather than CB, while other
results conclude that CB performed better than IBs. For example,
Dridi and Hasan (2010) indicated that Comparing the performance
of IBs to CBs globally would suggest that IBs performed better,
given the large losses incurred by CBs in Europe and the US as a
result of the International financial crisis Moin (2008) conducted
a study to analyze the effectiveness of the pioneering bank in
IB sector in Pakistan: Meezan Bank Limited (MBL). The study
examined MBL in contrast with five traditional banks in Pakistan.
Study analyzed following aspects: Profitability, risk, liquidity and
efficiency for 2003-2007. The researched concluded that MBL
was more solvent, less profitable, and less efficient as compared
to the median of 5 traditional banks. However, there was no major
distinction in liquidity between both streams of banks.
This research too is another attempt to look at a comparative
performance evaluation between for IBs and CB in Oman during
2013-2015, we discuss the extent to which CBs and IBs satisfy
its various performance indicators. We compare efficiency and
effectiveness of operations of both bank-groups in terms of
its return on equity (ROE), return on assets (ROA), and other
performance indicators derived from the income statement and
balance sheet of

both IBs and CB.
This research aims to provide both IBs and CB managers in Oman
a basic understanding of the comparative performance and this
will be of immense help in formulating their future decisions and
competitive financial position. Also, this research may be useful
in identifying its strengths and weaknesses.
The main objective of the research is to conduct a comparative
analysis of the performance for IBs and CB in Oman during 2013-
2015, to find out whether the IBs and CBs are operating efficiently.
The research analyzed the data of seven CB and two IBs for the
period 2013 to 2015.
The organization of the research is as follows; section (2)
discusses and review literature concerning the theoretical and
empirical studies of CB and IBs (3) provides a brief about the
CB and IBs in Oman. Section (4) illustrates the data collection
and methodology used in the research, section (5) deals with the
empirical findings and finally, in section (6) the conclusion of the
research is discussed.