Vol. 4, No. 8 International Journal of Business and Management 52 Disparity of Performance Indicators of Islamic Banks: Study on Bangladesh Mamunur Rashid Ph.D. Student, Graduate School of Business, National University of Malaysia (UKM) UKM Bangi, Selangor, Malaysia 43650 Hand Phone: 60166377245 E-mail: mamun.finance@gmail.com Ainun Nishat Department of Business Administration, East West University 43 Mohakhali C/A, Dhaka 1212, Bangladesh Tel: 88-02-9339-863 E-mail: anishat@gmail.com Abstract Islamic banking is still in emergent stage. However, according to Islamic Financial Services Board (IFSB), the industry is growing at the rate of 15% every year. As it is operating under a distinct system of banking, Islamic Shariah, Islamic banks have been facing immense competition from other Islamic banks and conventional banks of domestic and multination origin. Moreover, banking is an important industry, which is responsible for the development of the global economic condition. Hence, analysis of performance and identification of the problems, at a continuous basis, are basic necessities for Islamic banks. This study considers 12 important financial ratios and common size income statement and balance sheet information of Islamic banks for 2001 to 2006. The ratios were compared with simple industry average and other banks after distributing these into three generations, namely; generation one, two and three. Results showed poor performance of Islamic banking sector in almost every aspect, especially in the areas of profit maximization, investor management and operating inefficiency. The report identified unique banking system, lack of efficient human resources, lack of marketing and awareness creating activities, absence of Islamic capital and inter-bank markets and lack of direct government control as precedent problems. The study reported to bring about immediate change in HR management and policy, changes in operating policy, increase in marketing and awareness creating activity, guidelines and supervision of the government through direct Islamic Banking Law. Keywords: Islamic banking, Performance analysis, Common size statements 1. Introduction Banking is a crucial global financial service industry. The fundamental functions enclosed by a bank comprise mobilizing deposit and deploying that in credits of divergent categories in contour with the requirement of various customers. The interest of the extensive variety of people is strongly related to banks’ operation and performance. For the sake of investors’ safety, regulators are also engrossed in monitoring performance of banks all over. More than 90% of financial assets of Bangladesh are owned by different category of bank, which is also largely contributing to the growth in the county’s GDP and employment (Ali and Howlader, 2005). Since, banking activity affects the overall economic performance; incessant measurement of performance of these financial institutions has been indispensable. The deteriorating health of the banking industry and surge for bank failures globally entitle for renewed interest in bank performance analysis (Mansur et al, 1993). Evaluating banking industry performance has been difficult, since the industry has close affiliation with various economic units. Not only the complex economic affiliation, banks are engaged with social welfare of diverse motives. Moreover, this activity has been even skinned as the banks have started to establish them as global, universal, technologically sophisticated, therefore highly regulated and customer driven financial institutions. Islamic banks have enhanced a new dimension in banking initiated on religious standard. The industry is growing at an astounding rate over the last four decades Global Islamic financial services industry grew at a rate of 10-15% during