Risk return theory in Islamic banks

Risk Return Theory states that "Higher the risk, higher the expected return". However, this assumption seems less valid when return of deposit holder of Islamic banks   are compared with similar conventional banks.

The risk of deposit holder (Investment Account Holder) of Islamic Bank Is much higher (where the principal and the profit is not guaranteed unless the gross negligence of Islamic bank as Mudanb) than the risk carried by the deposit holder of conventional banks (where the principal and interest are guaranteed by the bank).

Whereas the expected return of both the depositor of Islamic and Conventional banks are more or less the same. In Some countries like Pakistan, the expected & actual return to deposit holder of Islamic banks are far less than the expected & actual return to the deposit holder of Conventional bank.

Source: Research AAOIFI vs. IFRS