Challenges and their critical success factors for the conventional and islamic banks of Bangladesh : a comparative analysis

Abstract

This study aims to develop a hierarchical model to identify and rank the challenges faced by conventional and Islamic banks in Bangladesh in providing quality service, along with their corresponding critical success factors (CSFs). Few studies have systematically analysed the challenges and practical solutions for these banks. In this study, specific objectives include: 1. Identifying challenges faced in prioritisation by conventional and Islamic banks. 2. Ascertaining CSFs for each challenge. 3. Ranking the challenges and CSFs. 4. Developing a hierarchical model to enhance the Bangladeshi banking sector's effectiveness. Using an exploratory sequential mixed-method design, qualitative data were collected from 14 experts from conventional banks and 15 from Islamic banks, followed by a survey of 120 respondents for prioritisation. Data for both stages were purposely accumulated from internal and external stakeholders of Bangladeshi conventional and Islamic banking sectors, ranging from relevant personnel. Six challenges were identified for conventional banks: ‘global financial crisis,’ ‘lack of governance,’ ‘liquidity crisis,’ ‘export-import remittance,’ ‘insufficient banking technology development,’ and ‘employees’ insufficient banking knowledge.’ For Islamic banks, the challenges included ‘lack of governance,’ ‘lack of capital market,’ ‘liquidity crisis,’ ‘lack of Islamic products,’ and ‘employees’ insufficient Islamic banking knowledge.’ The Analytic Hierarchy Process ranked ‘employees’ insufficient banking knowledge’ as the top challenge and ‘reward based on performance’ as the key CSF for conventional banks. For Islamic banks, the most crucial challenge was ‘lack of capital market,’ with ‘ensuring uniformity in Islamic banking practices’ as the main CSF. By addressing these challenges and CSFs, banks can achieve a sustainable competitive advantage, enhancing operational performance and service quality. The developed hierarchical model aims to improve both the competitiveness of banks and the broader economic development of Bangladesh.