Nature Of The British Constitution

Abstraction

This research probes in to the inquiry that can Pakistan economic system replace conventional banking with Islamic banking. For this, the paper has highlights some variables extracted from the literature. Based on these variables a questionnaire was floated in the Bankss ; Islamic and conventional both.

Datas and the arrested developments showed that “ Business development, profitableness, liquidness and solvency ” , “ Improper execution of Islamic banking patterns and rules ” and “ Conventional Bankss established and old ” are the most of import variables impacting the permutation procedure. Another of import variable was “ Islamic roots and spiritual factors ” , which harmonizing to a general position AIDSs in implementing Islamic banking. But harmonizing to the research and findings this factor is non at all of import, as in the instance of Pakistan.

There is a general perceptual experience in the head of the banking clients that Islamic Bankss are n’t puting in Sharia ways. There is deficiency of trust, which needs to be developed. This trust would assist get the better of the constituted roots of conventional banking. And for Bankss to at least take an enterprise in presenting Islamic banking, “ Business development, profitableness, liquidness and solvency ” , these factors are an inducement.

Recognitions

All thanks to Allah Almighty for giving me the ability and chance, required to finish this thesis.

My thanks and grasp to directors and staff at the Bank Islami, Bank Al-Habib, Bank Al Bank Alfalah and Dubai Islamic Bank, for their clip and information. Without their cooperation informations aggregation would hold been hard. I would specially wish to thank Mr. Fesal Omar, subdivision director Bank Islami and Mr. Aurangzeb Khan, director operations Bank Al-Habib.

Thankss to all my instructors till this day of the month, without them I would n’t hold been able achieve this. Particularly the support and aid of my supervisor, Ms. Sahr Nawaz, was priceless in doing it possible for me to finish this thesis.

And in last I would specially wish to thank my parents for their support, encouragement and love all these old ages. God Bless you!

Chapter-1: Introduction

An Overview of the subject

Islamic banking is the fastest turning manner of banking and comparatively newer to the conventional banking system. This banking system purely follows and patterns the Islamic regulations ( Sharia ) of puting in non-Riba ( involvement loose ) based tools and portions net income on the footing of Islamic net income and loss sharing regulations.

Islamic banking was introduced wholly on full graduated table during Zia ‘s epoch. But after his epoch this banking system took a downswing. In past what we can see is that Islamic banking has n’t been able to set up its roots in Pakistan wholly, despite Pakistan being a Islamic state. There are many grounds to this. But late State Bank of Pakistan ( SBP ) has taken some inaugural through its policies to present Islamic banking measure by measure. Now every bank in Pakistan is regulated to pattern Islamic banking along conventional banking.

This paper based on this has tried to reply the inquiry that, will SBP ‘s be able to replace Islamic banking with conventional banking in the hereafter? For this intent the paper has been organized into subdivisions which consist of literature reappraisal, methodological analysis, hypothesis edifice, analysis and eventually the decision.

Managerial Concern

The chief ground behind this research is to see if Islamic banking is compatible in an economic system. Will it be able to back up any economic system and prevent the recessions? Most significantly will it be able to replace the conventional banking and back up the weak Pakistan economic system in coming old ages?

This paper will be rather critical for a figure of institutes and organic structures ; viz. State Bank of Pakistan, Governments around the universe and Bankss, who seek to put in new ventures. This research will assist these institutes to calculate out the jobs, and on the footing of these jobs they can implement Islamic banking in better manner.

Study Aims

The aim of this survey is to make a decision that is Islamic Banking system a replacement of conventional banking system? More specifically the aims will be:

To examine into the jobs, the Islamic Bankss are holding.

To foreground factors and variables, and analyze their positive or negative influences upon Islamic banking system in an economic system.

To come to a concluding decision, that would non-Riba based system be as healthy, attractive, supportive and good to any economic system as involvement based economic system.

Related Definition

No full graduated table execution:

A system introduced in an economic system without proper back uping establishments.

Absence of Islamic Secondary Markets:

Muslim secondary markets are purposed secondary markets which would merchandise securities staying the Islamic rules.

Improper Implementation of Islamic Banking Practices and Principles:

The non-Islamic or conventional banking patterns practiced in Islamic Bankss.

Conventional Banks Established and Old:

It is the factor which explains that conventional Bankss being old and established have an border over their new opposite numbers, Islamic Bankss.

Islamic Roots and Religious Factors:

A state with Islamic roots promoting Islamic banking system

ReducedA Hazard:

The factor of uncertainness is reduced with, no usage of bad fiscal instruments and involvement based tools.

Global Financial Crisis:

The economic hurt or prostration of major planetary economic systems is called planetary fiscal crisis.

Interest Free Loans:

The loan offered to clients without Riba or involvement on the footing of net income and loss sharing.

Business Development, Profitability, Liquid and Solvency:

Business development ratios are the indexs of fiscal advancement and development over clip measured by entire plus growing, sedimentation growing, advances growing and investing growing.

Profitableness is the ultimate trial of directions runing effectivity and success of a company.

Liquidity ratios measure the short-run ability of the company to pay its maturating duties and to run into unexpected demands for hard currency.

The solvency ratio measuresA the size ofA a company ‘s after-tax income, excepting non-cash depreciation disbursals, as compared to the house ‘s entire debt duties. It provides a measuring of how likely a company will be to go on run intoing its debt duties.

Untouched Factors ( Exchange Rates, Fiscal Policies and Foreign Debt )

The conventional Bankss trade in three major sectors exchange rates, financial policies and foreign debt, which are unresolved in the Islamic banking system.

Chapter-2: Literature Reappraisal

Many Islamic states have opted Islamic banking constructions. Worth adverting here are Pakistan and Malaysia, who are among the few states who have implemented the Islamic Banking system on a national degree graduated table ( Ananymous, 2010 ) . The author discusses in item the development of Islamic Banking in both states during early 1980s.

Harmonizing to the author Pakistan is rather different from Malaysia in a sense that Pakistan implemented this banking system at one time countrywide. Unlike Pakistan, Malaysia implemented measure by measure. This the ground that Islamic banking is more established in Malaysia as compared to Pakistan.

The chief variables which enabled the system to go prevalent in both states are the Islamic roots and spiritual factors. Particularly in instance of Pakistan this factor worked as a accelerator during the Zia ‘s epoch and we can state it was merely confined to this epoch entirely. And with his going the Islamic banking lost its value. But late in 2001 the State Bank has implemented pro-Islamic banking policies and has vowed to take on Islamic manner of banking in future.

In the instance Malaysia, the strong cultural and spiritual tendencies towards hadj, pushed the Malayan authorities to set up Pilgrims Management and Fund Board in1963. This establishment formed bases and the client base for the freshly developed Islamic Banking system in 1980s.At the minute they have Islamic banking along with conventional banking.

Harmonizing to the author these two ways of implementing the Islamic banking system had the same end but different consequences. The consequences were non rather fruitful in the instance of Pakistan as it tried to use it nightlong. But in the instance of Malaysia the consequences have been rather fulfilling due to their stepwise policies, though there are some jobs ; Malaysia is now ask foring foreign investings into their alone double banking system ( Conventional along Islamic banking system ) .

The comparative ( Moin, 2008 ) provides a good penetration comparing between Pakistani Islamic bank ; in this survey, Meezan Bank Limited ( MBL ) and 5 conventional Bankss. He takes 12 fiscal ratios to measure on the bases of profitableness, liquidness, hazard and efficiency for the period 2003-2007 ; Rate on Asset, Rate on equity, Loan to lodge ratio, Loan to plus ratio, Debt to equity ratio, Asset use and income to write off ratio are used to measure the public presentation of two. T-test and F-test are used to find the differential public presentation between two. And the consequences harmonizing the Shehzad Moin show that MBL is less profitable, less hazardous and besides less efficient than 5 conventional Bankss. Worth adverting here is that, as he says conventional Bankss are more constituted and old. This could be the ground conventional Bankss are more profitable and public presentation wise better. He besides adds here that in economic systems, harmonizing to other similar surveies, the Bankss such as Muslim Bankss of UAE are more profitable, less liquid, less hazardous and more efficient than conventional Bankss. In other words he is of position point that in future to come the Islamic Bankss would turn out to be better than conventional Bankss in Pakistan.

Another issue prevailing and which is still someway non wholly answered is that, how is Islamic banking system, which is interest-free or Riba free, traveling to cover with the Western involvement based system on full graduated table Islamic theoretical account system? The research ( Mohsin S. Khan, 2001 ) discusses these issues. They point out that Islamic system has still a long manner on deciding these issues such as exchange rates, financial policies and foreign debt. These spheres are untasted and still to be answered.

Further they move on to the chief Southern Cross of the paper ; the full graduated table banking system debut in Iran and Pakistan. Harmonizing to them Iran had overnight execution of the Islamic banking system, contrary to Pakistan, which had it step wise in footings of execution. In Iran ‘s instance the writer takes on the pre-revolutionary economic construction and post-revolutionary internal and external development as variables, which acted as accelerator in execution of Islamic banking system. The pre-revolution epoch had some bad policies that stepped frontward in conveying the economic system alteration. Whereas in the station revolution epoch, some events made it like more likely to convey about cardinal restructuring of economic behaviour and establishments foreign ; in other words the Islamic economic system. These events include the foreign assets stop deading, economic countenances, Afghan refugee and war with Iraq. These all events summed up to Islamic banking system ; as banking system was used for restructuring. In Pakistan ‘s instance, the execution procedure was gradual as compared to Iran.And Islamization is the factor which brought about this alteration. Harmonizing to the authors the chief job both economic systems have faced is that, how to finance the shortage of authorities through Bankss. The phenomenon of borrowing for Iran is simply a western term, intending that the Bankss are authorities owned and it makes no sense of adoption and returning, whereas Bankss lend to each other at fixed rate of return. While Pakistan observes public adoption at a rate higher than PLS sedimentations of the Bankss.

Overall the authors conclude that the Islamic banking system, as feared by many, did n’t prostration instead it enabled rapid growing in private-sector sedimentations and resource mobilisation. The consequences harmonizing to them stay a inquiry under the free market in both economic systems, because authorities intercession has made hard to judge.

The research paper ( Muhammad Azhar Sheikh, 2010 ) is based on the sample taken from Bahawalpur, Pakistan. He compares the two banking systems on the footing of client satisfaction. Harmonizing to him, the clients are the one to be satisfied at the terminal of the twenty-four hours. And there are specific set of variables associated to each banking system, which are base to client satisfaction degree. Harmonizing to his survey economic benefits, fiscal place of Bankss, latest installations, involvement on sedimentations, strong planetary image and repute are factors set uping the client attractive force towards conventional Bankss, while involvement free loan, fiscal place of Bankss, Islamic instruction and Sharia, cognition of Islam and spiritual environment are factors actuating clients towards Islamic Banking.

Harmonizing to his findings conventional bank clients are more satisfied, based on the above mentioned factors, than the Islamic bank clients. He concludes by stating that Islamic Bankss should present attractive selling runs, lay attending to service quality and emphasis more on advancing their Muslim instruments.

Analyzing the Islamic Banking system in the Middle East and North Africa part, has opened new avenues of jobs and hurdlings in developing the Islamic economic system to its full. The paper ( Moore, 2000 ) discusses a different angle, which harmonizing to the author seems to be the chief component of inefficiency and low rate of adoptability in Middle East and North-African economic systems.

Harmonizing to the author there are market inefficiencies, which have n’t proved to be good to both manners of banking. For illustration all these states ( Egypt, Tunisia, Egypt, Sudan, Bahrain, Jordan, Kuwait, Qatar, Turkey and UAE ) have Conventional every bit good as Islamic banking. This has caused caput to head competition and in return caused market inefficiencies.

Furthermore he adds political relations as one of the chief variable that backs up Islamic banking patterns in an economic system. He says that for Islamic banking system to vie good in an economic system, the political every bit good as the banking system should be competitory instead than restrictive government. In other words free market. This restrictive government causes inefficiencies, as in the instance of authoritiess ‘ intercession of repairing involvement rates below the rising prices rates.

This paper ( Md.Safiullah, 2010 ) takes the recent scenario in Bangladesh. He compares the two banking systems to pull out the high quality among two based on their public presentation. He on the bases of concern development, profitableness, liquid and solvency, committedness to economic system and community, efficiency and productiveness thrusts his consequences. And harmonizing to him the factors, committedness to economic system and community, efficiency and productiveness, show that conventional Bankss are executing better than interest-free Bankss, while based on factors, concern development, profitableness, liquid and solvency, the Islamic Bankss are superior to conventional Bankss. Overall he concludes that Islamic Bankss are superior to convention Bankss, but that does non intend that conventional Bankss are non better executing entities instead they have important part to certain sections of the market. Conventional Bankss should follow Islamic Bankss by emphasizing more on human public assistance instead than net income maximization.

The research paper ( AwwalSarker, 2001 ) explains the existent job why Islamic Bankss have non performed at par with their opposite numbers in an economic system. Harmonizing to Abdul Awwal Islamic Bankss can non work at their really best public presentation until they are under conventional banking system. The ground does n’t stands with the Islamic banking system instead with the conventional Bankss working. And unless and until Islamic banking system is n’t introduced at a full graduated table in an economic system, it wo n’t bring forth coveted consequences and would miss in some magnitude. For it to be successful and efficient, the Islamic economic system must hold entree to liquidness. And it is merely possible if Islamic economic system has full fledge Islamic secondary markets. Where Muslim Bankss can exert their liquidness and expand concern to them. These Islamic theoretical accounts will so assist Islamic Bankss and assist them accomplish desired efficiency. Abdul Awwal besides suggests Islamic GAAP for farther beef uping the Islamic banking system.

This research ( Ariss, 2010 ) points out that there is no difference in profitableness among two banking systems. Her sample size included Islamic Bankss and conventional Bankss from 13 different states. And she reached to a decision that there is difference in plus and portfolio composing but no important difference in profitableness. Recent old ages show that Islamic banking has been rather popular with the Western Bankss. And they have been systematically puting their clip and assets to Islamic manner of banking. And Bankss that had invested in the Islamic manner of banking instead than derived functions ( prohibited by Sharia ) narrowed their exposure to recent dazes of 2007. While on the other manus Islamic Bankss have shown resiliency.

This research ( Beng Soon Chong, 2009 ) explains the existent job prevailing in the Islamic economic systems when it comes to execution of Islamic banking system. Harmonizing to authors theoretically the Islamic banking is based on net income loss sharing ( PLS ) rule. But when it comes to pattern, the things are rather opposite. The Islamic banking practiced is more similar conventional banking. There is n’t much to distinguish. The writers of this research have based their survey on the largest Islamic banking system, Malaysia. Harmonizing to them there are n’t any prohibitions in the banking system to keep Muslim Bankss from deviating from the PLS manner. Rather Muslim Bankss are seen holding undistinguished proportion of PLS based funding on the plus side, where as a important acceptance to PLS rule is seen on the liability side. Therefore there should be proper regulative organic structure to implement the proper pattern of PLS and at the same clip keep a good competition with conventional Bankss.

Another research ( Pryor, 2007 ) explains through his bunch analysis that Islam as faith has no important impact on economic system. This paper regulations out the variable, which considered Islamic roots to be a important variable in sing Islamic banking as a replacement of conventional banking in Islamic states. Islam as faith, harmonizing to this survey has really small impact on economic institutes.

Chapter-3: Methodology Analytical Choice

3.1 Research Type

The research carried out is characterized as Basic Research. This research is intended to increase the bounds of the cognition of the subject under survey. In making so, the survey aims to verify the acceptableness of the given variables. Further on the footing of the consequences of the variable trials, it will reason that which variables will be impacting the permutation of Islamic banking the most. Furthermore it will besides propose which variables are of import for the concerned establishments to see as built-in portion of the implementing Islamic banking.

3.2 Data Type & A ; Research period

The research type based on Basic Research needed two beginnings to carry on the research. These beginnings used to garner informations were Primary informations beginnings and Secondary informations beginnings.

The primary informations beginnings consisted of questionnaire. The inquiries were based on the variables extracted from the secondary beginnings. These variables were wholly gauged with a likert scale inquiry. The questionnaire consisted of a sum of 17 inquiries.

The secondary informations used chiefly consists of periodical and scholarly plants. Internet was used to seek the periodicals. Mentions have been attached in the mention subdivision. These documents were used to pull out variables and to understand the relationship to the execution of the Islamic banking. Further these articles besides helped in preparation of theoretical model and questionnaire.

The questionnaires were floated in a individual point in clip to the relevant sample ; Banking sector. The questionnaires were floated to merely bankers, maintaining in head that they are were moving both as clients and service suppliers.

The research period was from September 2010 to April 2011. The entire clip that was allocated for his research was eight months. The first four months were allocated for the Literature Review, Theoretical Framework and hypothesis development and the other four months were allocated for research methodological analysis, informations aggregation, analysis and decision.

3.3 Research Hypothesis

No full graduated table execution:

H0: I?=0: “ No full graduated table execution ” has undistinguished impact on “ Islamic banking a replacement of conventional banking ”

H1: I?a‰ 0: “ No full graduated table execution is consequence of absence of Islamic secondary markets ” has important impact on “ Islamic banking a replacement of conventional banking ”

Improper Implementation of Islamic Banking Practices and Principles:

H0: I?=0: “ Improper execution of Islamic banking patterns and rules ” has undistinguished impact on “ Islamic banking a replacement of conventional banking ”

H1: I?a‰ 0: “ Improper execution of Islamic banking patterns and rules ” has important impact on “ Islamic banking a replacement of conventional banking ”

Conventional Banks Established and Old:

H0: I?=0: “ Conventional Bankss established and old ” has undistinguished impact on “ Islamic banking a replacement of conventional banking ”

H1: I?a‰ 0: “ Conventional Bankss established and old ” has important impact on “ Islamic banking a replacement of conventional banking ”

Islamic Roots and Religious Factors:

H0: I?=0: “ Islamic roots and spiritual factors ” has undistinguished impact on “ Islamic banking a replacement of conventional banking ”

H1: I?a‰ 0: “ Islamic roots and spiritual factors ” has important impact on “ Islamic banking a replacement of conventional banking ”

ReducedA Hazard:

H0: I?=0: “ Reduced hazard ” has undistinguished impact on “ Islamic banking a replacement of conventional banking ”

H1: I?a‰ 0: “ Reduced hazard ” has important impact on “ Islamic banking a replacement of conventional banking ”

Interest Free Loans:

H0: I?=0: “ Interest free loans ” has undistinguished impact on “ Islamic banking a replacement of conventional banking ”

H1: I?a‰ 0: “ Interest free loans ” has important impact on “ Islamic banking a replacement of conventional banking ”

Business Development, Profitability, Liquidity and Solvency:

H0: I?=0: “ Business development, profitableness, liquid and solvency ” has undistinguished impact on “ Islamic banking a replacement of conventional banking ”

H1: I?a‰ 0: “ Business development, profitableness, liquid and solvency ” has important impact on “ Islamic banking a replacement of conventional banking ”

Untouched Factors ( Exchange Rates, Fiscal Policies and Foreign Debt ) :

H0: I?=0: “ Untouched factors ( exchange rates, financial policies and foreign debt ) ” has undistinguished impact on “ Islamic banking a replacement of conventional banking ”

H1: I?a‰ 0: “ Untouched factors ( exchange rates, financial policies and foreign debt ) ” has important impact on “ Islamic banking a replacement of conventional banking ”

3.4 Theoretical Framework and Variables under Consideration

Improper execution of Islamic banking patterns and rules

Untouched factors ( exchange rates, financial policies and foreign debt )

No full graduated table execution ( Absence of Islamic secondary markets )

IS ISLAMIC Banking A SUBSTITUTE OF CONVENTIONAL BANKING IN PAKISTAN?

Conventional Bankss established and old

Business development, profitableness, liquidness and solvency

Islamic roots and spiritual factors

Interest free loans

ReducedA hazard

3.4.1 Reference List of variables under consideration:

The independent variables under consideration are:

No full graduated table execution

Improper Implementation of Islamic Banking Practices and Principles

Conventional Banks Established and Old

Islamic Roots and Religious Factors

ReducedA Hazard

Interest Free Loans

Business Development, Profitability, Liquidity and Solvency

Untouched Factors ( Exchange Rates, Fiscal Policies and Foreign Debt )

3.4.2 Theoretical justification

The variables selected from the literature as mentioned above were the most of import in explicating the execution of Islamic banking. These eight variables best explain the relationship to the dependant variable. The analyses can be best done utilizing these variables and would assist the paper conclude the best consequences based on these variables.

3.5 Information Gathering

3.5.1 Survey Design

The primary beginning used to garner informations as mentioned before is questionnaire. The questionnaire consisted of 17 inquiries in entire. The questionnaire comprised of assorted type of inquiries ; simple-dichotomy inquiries, determinant-choice inquiries and largely likert graduated table based inquiries ( 1 = strongly hold to 5 = strongly disagree ) . There were 9 inquiries specifically estimating independent variables, while other inquiries were asked to ask the person ‘s current banking position and etc.

3.5.2 Population, Working Population & A ; Planned Sample

The population under research was persons from banking sector. The sample was collected from Bank Islami, Bank Al-Habib, Bank Al Bank Alfalah ( Islamic Banking subdivision ) and Dubai Islamic Bank. The location of the subdivisions of above mentioned Bankss were in the vicinity of DHA Lahore. Inquirers were floated in all of these Bankss, irrespective of them being conventional or Islamic. The ground behind this was to garner a general perceptual experience every bit good as to happen the relationship of the variables in conformity to Islamic banking. If the sample would hold been confined to lone conventional banking sector the consequences should hold shown biasness.

3.5.3 Sample Size consideration

The sample size, due to clip restraint, was kept to 20. The sample size includes equal figure of persons from each bank. The sample size depicts the complete banking sector ; Islamic plus conventional banking sector. The questionnaire was filled from Islamic and conventional banking employees. They represent their banking systems plus clients of their several banking system. Individuals we intentionally selected to be employees every bit good as clients of the same banking system so that they can stand for the system as employees and clients as the users of the several system.

3.5.4 Choice of trying techniques

The sampling technique used is non-probability sampling, due to clip deficit and on convenience. The other feature of the technique is that it is quota trying ; sample stand foring the coveted features of the population.

3.5.5 Field work & A ; Respondents profile

As mentioned above four Bankss were used. The sample contains four troughs of each subdivision. They all held MBA grades. Other sample consisted of staff ; with at least Bachelor ‘s grade. Most of the respondents were male, females were besides included. All age group of all respondents was between ages of 21-45.

3.5.6 Data Analysis Tools and Regression

The analysis tools used in this research are as followers:

Statgraphics

SPSS

Excel

These tools were used to run arrested development analysis, cross tabular matters and frequence descriptive.

Chapter-4: Appraisal, Analysis and Conclusion

4.1. Appraisal Consequences

Multiple arrested developments were run to look into whether Islamic banking is a replacement of conventional banking or non. The undermentioned arrested development helped to find the values of R-squared, Adjusted R-squared and p-value of the independent variables. Among other values which were extracted to assist back up above mentioned values are: Durbin-Watson statistic, t-statistics ( t-stat ) , and f-ratio.

Dependent Variable:

IS ISLAMIC Banking A SUBSTITUTE OF CONVENTIONAL BANKING IN PAKISTAN?

Independent Variables:

No full graduated table execution is consequence of absence of Islamic secondary markets

Improper execution of Islamic banking patterns and rules

Conventional Bankss established and old

Islamic roots and spiritual factors

Reduced hazard

Interest free loan

Business development, profitableness, liquidness and solvency

Untouched factors ( exchange rates, financial policies and foreign debt )

First Model:

The consequences of the initial arrested development are as followers:

Multiple Arrested developments:

Dependent variable: Is Islamic banking a replacement of conventional banking in Pakistan? Independent variables:

Improper execution of Islamic banking patterns and rules

Conventional Bankss established and old

Islamic roots and spiritual factors

Reduced hazard

Interest free loan

Business development, profitableness, liquidness and solvency

Untouched factors ( exchange rates, financial policies and foreign debt )

No full graduated table execution

Standard

Thymine

Parameter

Estimate

Mistake

Statistic

P-Value

Improper execution of Islamic banking patterns and rules

0.185764

0.0999268

1.859

0.0877

Conventional Bankss established and old

0.181031

0.0688079

2.63096

0.0219

Islamic roots and spiritual factors

0.0679231

0.169804

0.400008

0.6962

Reduced hazard

-0.0642621

0.255681

-0.251337

0.8058

Interest free loan

0.139522

0.155798

0.895533

0.3881

Business development, profitableness, liquidness and solvency

0.193469

0.0954131

2.02769

0.0654

Untouched factors ( exchange rates, financial policies and foreign debt )

0.00899981

0.0865969

0.103928

0.9189

No full graduated table execution

-0.197443

0.165545

-1.19269

0.2560

Analysis of Discrepancy

Beginning

Sum of Squares

Df

Mean Square

F-Ratio

P-Value

Model

48.1906

8

6.02383

39.95

0.0000

Residual

1.80939

12

0.150783

Entire

50.0

20

R-squared = 96.3812 per centum

R-squared ( adjusted for d.f. ) = 94.2703 per centum

Standard Error of Est. = 0.388308

Mean absolute mistake = 0.252486

Durbin-Watson statistic = 1.96343

Lag 1 residuary autocorrelation = 0.0126989

The end product shows the consequences of suiting a multiple additive arrested development theoretical account to depict the relationship between dependant, which is the dependent variable, and 8 independent variables. The equation of the fitted theoretical account is

Q7 = 0.185764* Improper execution of Islamic banking patterns and rules + 0.181031* Conventional Bankss established and old + 0.0679231* Islamic roots and spiritual – 0.0642621* Reduced hazard + 0.139522* Interest free loan

+ 0.193469* Business development, profitableness, liquidness and solvency

+ 0.00899981* Untouched factors ( exchange rates, financial policies and foreign debt )

– 0.197443* No full graduated table execution

Since the P-value in the ANOVA tabular array is less than 0.05, there is a statistically important relationship between the variables at the 95.0 % assurance degree.

Final Model

The theoretical account above had undistinguished relationship, therefore by taking the undistinguished independent variables following were the consequences:

Multiple Arrested development

Standard

Thymine

Parameter

Estimate

Mistake

Statistic

P-Value

Improper execution of Islamic banking patterns and rules

0.156498

0.0686581

2.27938

0.0358

Conventional Bankss established and old

0.193866

0.0526387

3.68296

0.0018

Business development, profitableness, liquidness and solvency

0.214935

0.0621696

3.45724

0.0030

Analysis of Discrepancy

Beginning

Sum of Squares

Df

Mean Square

F-Ratio

P-Value

Model

47.8625

3

15.9542

126.89

0.0000

Residual

2.13745

17

0.125733

Entire

50.0

20

R-squared = 95.7251 per centum

R-squared ( adjusted for d.f. ) = 95.2222 per centum

Standard Error of Est. = 0.354588

Mean absolute mistake = 0.254287

Durbin-Watson statistic = 2.28056

Lag 1 residuary autocorrelation = -0.152037

Final theoretical account selected:

The end product shows the consequences of suiting a multiple additive arrested development theoretical account to depict the relationship between Q7, independent variable, and 8 independent variables. The equation of the fitted theoretical account is

IS ISLAMIC Banking A SUBSTITUTE OF CONVENTIONAL BANKING IN PAKISTAN? = 0.156498* Improper execution of Islamic banking patterns and principles+ 0.193866* Conventional Bankss established and old + 0.214935* Business development, profitableness, liquidness and solvency

First theoretical account holding negative relationship with the variables needed some amendment. So the arrested development was performed once more by taking undistinguished variables. The weightages of “ Conventional Bankss established and old ” and “ Business development, profitableness, liquidness and solvency ” increased demoing a important relationship to the dependant variable. Since the P-value in the ANOVA tabular array is less than 0.05, there is a statistically important relationship between the variables at the 95.0 % assurance degree.

4.1.1 Trials of Significance of Regression, Parameters:

The followers will be sum uping the arrested development performed above, and in add-on associating it to the hypothesis.

Equation ( First Model ) :

IS ISLAMIC Banking A SUBSTITUTE OF CONVENTIONAL BANKING IN PAKISTAN? = 0.185764* Improper execution of Islamic banking patterns and rules + 0.181031* Conventional Bankss established and old + 0.0679231* Islamic roots and spiritual factors – 0.0642621* Reduced hazard + 0.139522* Interest free loan+ 0.193469* Business development, profitableness, liquidness and solvency + 0.00899981* Untouched factors ( exchange rates, financial policies and foreign debt ) – 0.197443* No full graduated table execution is consequence of absence of Islamic secondary markets

The equation above explains the relationship between dependant variable with the independent variables of the first theoretical account. The weightages of two variables, “ No full graduated table execution ” is consequence of absence of Islamic secondary markets and “ Reduced hazard a positive factor in planetary fiscal crisis ” are negative. Meaning they have negative relationship to the dependant variable.

Equation ( Final Model ) :

IS ISLAMIC Banking A SUBSTITUTE OF CONVENTIONAL BANKING IN PAKISTAN? = 0.156498* Improper execution of Islamic banking patterns and principles+ 0.193866* Conventional Bankss established and old+ 0.214935* Business development, profitableness, liquidness and solvency

First theoretical account holding negative relationship with the variables needed some amendment. So the arrested development was performed once more by taking undistinguished variables. The weightages of “ Conventional Bankss established and old ” and “ Business development, profitableness, liquidness and solvency ” increased demoing a important relationship to the dependant variable.

P-value, R-squared and Adjusted R-squared:

The p-value explains the significance of a relationship between dependant and independent variables. As the taken assurance interval is 95 % , therefore the values below.05 would be considered important. The initial trials which were run on the independent variables showed undistinguished relationship of independent variables as compared to the dependant variable, except ( p-value of.021. The values of R-squared ( 96.3 % ) and adjusted R-squared ( 94.2 % ) were highly good, demoing the important relationship. Thus the consequences indicated that by taking the undistinguished variables, the relationship can be improved.

So merely “ Improper execution of Islamic banking patterns and rules ”

“ Conventional Bankss established and old ” , ” Business development, profitableness, liquidness and solvency ” were used to run the arrested development once more. And the consequences, as given in Final theoretical account, were extracted. Meaning that:

Improper execution of Islamic banking patterns and rules

Conventional Bankss established and old

Business development, profitableness, liquidness and solvency

are most important independent variables.

R-squared and adjusted R-squared values are 95.7 % and 95.2 % severally. Thus theoretical account is accepted. These values are first-class, therefore picturing those alterations in independent variable is caused by the dependant variable and better the theoretical account explains that alteration. The value derived is up to the grade and back up the theoretical account in supportive manner.

Hypothesis Testing:

H0: I?=0: “ No full graduated table execution ” has undistinguished impact on “ Islamic banking a replacement of conventional banking “

H1: I?a‰ 0: “ No full graduated table execution ” has important impact on “ Islamic banking a replacement of conventional banking ”

P-value for this independent variable is 0.2560. It is greater than 0.05 therefore H0 is accepted, intending that there is undistinguished consequence on the dependant variable.

H0: I?=0: “ Improper execution of Islamic banking patterns and rules ” has undistinguished impact on “ Islamic banking a replacement of conventional banking “

H1: I?a‰ 0: “ Improper execution of Islamic banking patterns and rules ” has important impact on “ Islamic banking a replacement of conventional banking ”

P-value for this independent variable is.0358. It is lesser than 0.05 therefore H0 is rejected, intending that there is important consequence on the dependant variable. And H1, alternate hypothesis is accepted.

The article ( Beng Soon Chong, 2009 ) besides explains that there is improper execution of Sharia rules in Islamic banking. It is statistically proved through the sample that excessively that, the Islamic Bankss are n’t following the Sharia Torahs in their patterns.

H0: I?=0: “ Conventional Bankss established and old ” has undistinguished impact on “ Islamic banking a replacement of conventional banking “

H1: I?a‰ 0: “ Conventional Bankss established and old ” has important impact on “ Islamic banking a replacement of conventional banking ”

P-value for this independent variable is 0.0018. It is lesser than 0.05 therefore H0 is rejected, intending that there is important consequence on the dependant variable. And H1, alternate hypothesis is accepted. Among all the independent variables this variable has the least p-value.

This article ( Moin, 2008 ) stated that conventional Bankss being old and established, creates a hurdle in the permutation of Islamic banking. Therefore by looking at the profitableness and liquidness ratios one can reason that conventional Bankss being old and established have caused much job in the permutation procedure.

H0: I?=0: “ Islamic roots and spiritual factors ” has important impact on “ Islamic banking a replacement of conventional banking ”

H1: I?a‰ 0: “ Islamic roots and spiritual factors ” has undistinguished impact on “ Islamic banking a replacement of conventional banking ”

P-value for this independent variable is 0.6962. It is greater than 0.05 therefore H0 is accepted, intending that there is undistinguished consequence on the dependant variable.

The article ( Pryor, 2007 ) said that there is an undistinguished impact of Islamic roots when implementing Islamic banking in an economic system. Therefore through research this is proved. As a general observation, we can see that Islamic banking was implemented in Zia ‘s epoch. But still it has n’t been able to set up its roots although Pakistan was established on the footing of Islam.

H0: I?=0: “ Reduced hazard ” has undistinguished impact on “ Islamic banking a replacement of conventional banking “

H1: I?a‰ 0: “ Reduced hazard ” has important impact on “ Islamic banking a replacement of conventional banking ”

P-value for this independent variable is 0.8058. It is greater than 0.05 therefore H0 is accepted, intending that there is undistinguished consequence on the dependant variable.

H0: I?=0: “ Interest free loan ” has undistinguished impact on “ Islamic banking a replacement of conventional banking “

H1: I?a‰ 0: “ Interest free loan ” has important impact on “ Islamic banking a replacement of conventional banking ”

P-value for this independent variable is 0.3881. It is greater than 0.05 therefore H0 is accepted, intending that there is undistinguished consequence on the dependant variable.

H0: I?=0: “ Business development, profitableness, liquid and solvency ” has undistinguished impact on “ Islamic banking a replacement of conventional banking ”

H1: I?a‰ 0: “ Business development, profitableness, liquid and solvency ” has important impact on “ Islamic banking a replacement of conventional banking ”

P-value for this independent variable is 0.0030. It is lesser than 0.05 therefore H0 is rejected, intending that there is important consequence on the dependant variable. And H1, alternate hypothesis is accepted.

This article ( Md.Safiullah, 2010 ) figured out the following variables to be important: Business development, profitableness, liquid and solvency. Through the research and consequence this has been proved that on the footing of these factors Islamic Bankss are executing rather good. Worth adverting here is that due to the proficient nature of this inquiry, this was merely pitched to the bankers merely. And they on their experience answered it to be of import factors.

H0: I?=0: “ Untouched factors ( exchange rates, financial policies and foreign debt ) ” has undistinguished impact on “ Islamic banking a replacement of conventional banking “

H1: I?a‰ 0: “ Untouched factors ( exchange rates, financial policies and foreign debt ) ” has important impact on “ Islamic banking a replacement of conventional banking ”

P-value for this independent variable is 0.9189. It is greater than 0.05 therefore H0 is accepted, intending that there is undistinguished consequence on the dependant variable.

4.1.2. Consequences of Parameter Tests of Significance

Standard Error of Estimate and Mean Absolute Mistake:

The standard mistake of the estimation is a step of the truth of anticipations made with aA arrested development line. The standard mistake of the estimation shows the standard divergence of the remainders to be 0.388308. TheA average absolute mistake ( MAE ) A is a measure used to mensurate how close prognosiss or anticipations are to the eventual results. The average absolute mistake ( MAE ) of 0.252486 is the mean value of the remainders. But when the arrested development was ran once more the values of SEE and MAE were 0.354588 and 0.254287 severally.

T-stats:

The single t-stats of the Q10, Q11, and Q16 are 2.2, 3.6 and 3.45 severally, all greater than 2.The coefficients are at least twice every bit big as the standard mistake, reasoning that the variables in inquiry have a important impact on the dependant variable. High t-statistics ( over 2 ) mean the variable is important. Whereas, ab initio the first tabular array showed merely Q11 and Q16 ‘s value greater than 2. Therefore taking the undistinguished variables provided the coveted consequences.

Durbin Watson Statistics:

The following value mentioned in the theoretical account is Durbin Watson ( D.W ) statistics. The value is 2.2, which is greater than 2, intending there is no correlativity between independent variables and this proves the significance of the theoretical account. This means that there is no Serial-Correlation, Multi-Collinearity and Heteroskedasticity. Initially in the first theoretical account the D.W was 1.9, which was non explicating the theoretical account ‘s significance up to the desired consequences.

4.1.2 Regression Summary:

Harmonizing to the bankers and the most incentive for Bankss is to implement Islamic banking on the footing of “ Business development, profitableness, liquid and solvency ” . These factors are the chief attractive force for the approaching Bankss every bit good as for the conventional Bankss to accommodate to Islamic banking. Md.Safiullah in has article has rated them as the most attractive and good factors for Muslim Bankss. This is besides proved by the equation, because this independent variable has the highest weightage.

On the other manus statistically the factor “ Conventional Bankss established and old ” has the lowest p-value. This relationship suggests most of the sample considered it to be the one the most of import hurdle in the permutation.

Another factor “ Improper execution of Islamic banking patterns and rules ” is besides a factor being hurdle in the permutation. Merely if Muslim Bankss start utilizing proper and reliable Sharia regulations to bank, they can guarantee the client base to switch in their favour.

4.2. Descriptives:

Your personal banking history:

Frequency

Percentage

Valid Percentage

Accumulative Percentage

Valid

Is an Muslim banking history with an Islamic bank

14

70.0

70.0

70.0

Is an Muslim banking history with a conventional bank

1

5.0

5.0

75.0

Is a conventional banking history with a conventional bank

5

25.0

25.0

100.0

Entire

20

100.0

100.0

The information sample taken has 70 % respondents holding Islamic banking history with an Islamic bank, while one had an Islamic banking history with a conventional bank. While 5 were conventional banking history holders

The saloon chart above shows that a batch people would wish to exchange to Islamic banking histories in the nearest hereafter. Therefore demoing this shows future potency in Islamic banking.

The saloon chart above shows that the client trueness of Islamic banking clients. Here in the inquiry they are given a quandary. In which most respondents want to lodge to the Islamic banking.

The above saloon chart tells most people utilizing Islamic banking is due to being their Islamic background

4.3. Cross Tabulation:

Imagine you are an Islamic bank ‘s client. Interest rate alterations have resulted in conventional Bankss giving higher returns. You will * Harmonizing to you why Islamic banking is of import Cross tabular matter

Count

Harmonizing to you why Islamic banking is of import

Entire

Strictly Religion

Net income and loss component

Both faith and PLS rule

Is non

Imagine you are an Islamic bank ‘s client. Interest rate alterations have resulted in conventional Bankss giving higher returns. You will

Stick with the Islamic bank

8

1

3

2

14

Not certain precisely

2

2

1

1

6

Entire

10

3

4

3

20

The above cross tabular matter, 8 respondents, explains why the clients will lodge to the Islamic banking in the quandary given in the inquiry. The consequences explain this that due to the ground that they are purely Islamic. We can besides state that purely spiritual habit displacement to conventional banking no affair what.

4.4. Restrictions of the Survey:

Uncooperative banking staff

Biasness sing positions

Respondents ‘ figure was limited as compared to the original population size

The research was conducted in Lahore part. Thus respondents from a individual geographical part may comprehend Islamic banking otherwise from other parts of Pakistan.

Time was restriction in transporting out more elaborate research.

All Bankss have non been covered in the sample size.

4.5. Decision:

“ Business development, profitableness, liquidness and solvency ” , “ Improper execution of Islamic banking patterns and rules ” and “ Conventional Bankss established and old ” are important independent variables. First variable explains the positive inducement to replace Islamic banking. While the 2nd variable suggests that if Islamic work on bettering the services they have promised, they might be able to traverse the hurdle of 3rd variable. The 3rd variable harmonizing to the research is at the minute biggest hurdle in implementing Islamic banking in Pakistan economic system. For that they need to work on the 2nd variable.

There are hurdlings at this minute. But harmonizing to the research client trueness and “ Business development, profitableness, liquidness and solvency ” can turn out to be steady execution of Islamic banking in the hereafter. But at the minute the strong base of Conventional Bankss is turn outing it to be the hard. They need to work purely on implementing Sharia Torahs to pull sedimentations.