Islamic Finance and Financial Stability: A Review of the Literature?

Belouafi, Ahmed; Bourakba, Chaouki; Saci, Karima

doi:10.4197/islec.28-2.1

Cited by 19 publications

(15 citation statements)

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“…9. A detailed review of the literature related to the financial stability in Islamic finance is descriptively well documented in Belouafi et al (2015).…”

Section: Conclusion and Policy Implicationsmentioning

confidence: 99%

“…When the PLS S&I accounts are considered as equity, the capital asset ratio (CAR or ) tends to be greater than when such accounts are treated as liabilities. It is not obvious that the z-score index will be greater in the first case, because it depends on the volatility of the return on assets ratio.11 A detailed review of the literature related to the financial stability in Islamic finance is descriptively welldocumented inBelouafi et al (2015).12 In contrast to the regression analysis, the correlation analysis works with random variables without distinction between dependent and explanatory variables, but the algebraic signs of the partial estimate and the correlation coefficient are the same Gideon (2010). proved the similar signs between coefficients-based correlation and estimates slopes-based regression.…”

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confidence: 99%

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Panel modeling of z-score: evidence from Islamic and conventional Saudi banks

Ghassan

Guendouz

2019

IMEFM

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Purpose This paper aims to measure the stability extent of the banking sector in Saudi Arabia, including Islamic and conventional banks (CBs), using quarterly data. Design/methodology/approach The paper uses seemingly unrelated regressions to estimate the determinants of the z-score. Findings The panel data model shows that Islamic banks (IBs) reduce the financial stability index relatively; meanwhile, they contribute efficiently to enhance the financial stability through the diversification of their assets. The Saudi banking sector exhibits strong concentration affecting the financial stability negatively. Research limitations/implications The paper’s topic can be extended to cover the recent period. Practical implications The limited presence of IBs in the Saudi banking sector jeopardizes any effort to improve the financial stability. Social implications By attracting more clients, IBs would contribute more to the financial stability in the Saudi economy. Also, the monetary authority has to expand the share of IBs in the financial system at least 50-50 compared to CBs. Originality/value The z-score is mostly analyzed with yearly data; in this paper we use quarterly data to describe at infra-annual frequency the variability of the z-score index. Also, we consider in detail the statistical properties of the banks’ data.

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“…9. A detailed review of the literature related to the financial stability in Islamic finance is descriptively well documented in Belouafi et al (2015).…”

Section: Conclusion and Policy Implicationsmentioning

confidence: 99%

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confidence: 99%

Panel modeling of z-score: evidence from Islamic and conventional Saudi banks

Ghassan

Guendouz

2019

IMEFM

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“…Čihák and Hesse (2010) examine the stability of Islamic banking and conventional banking using the proxy indicator Z-Score, where macroeconomic variables significantly affect financial system stability. Belouafi, Bourakba, and Saci (2015) examine the research literature that discusses Islamic finance and finance, where the Z-Score indicator is the most commonly used proxy to measure the stability of Islamic financial intermediaries. The first four studies mentioned above all use Z-Score as proxy indicators of banking stability and use the Markov Switching model as a research tool, but only use one country sample.…”

Section: Figure 1 Economic Growth Of Indonesia Malaysia and Pakistan 2011-2019mentioning

confidence: 99%

Stability Analysis Of Islamic Banking: Indonesia, Malaysia And Pakistan

Luqmanulhakim

Rulindo²,

Anwar³

2021

Iqtishaduna

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Following the 2008 financial crisis, the global economy will continue to experience shock in the years to come. Therefore, it is vital to conduct research that can anticipate the impact of fluctuations in financial stability. This research examines the stability of the Islamic banking system in Indonesia, Malaysia, and Pakistan, using Z-Score as a proxy variable for stability measurement and Markov Switching VAR for the method. The objectives are to identify which Islamic banking has better resilience in facing crisis and identify the economic variables that have a significant effect on the stability of Islamic banking. The results showed that the stability of Indonesian Islamic banking was more stable compared to Malaysia and Pakistan. The crisis periods determined from the method show that in 2019 all countries studied entered the beginning of the crisis period, which means the world conditions tend to re-enter the crisis, repeating the 2008 financial crisis.

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“…Thus, and after all the ongoing talk about the IF system and its relationship to conventional finance, it has special interest to review the ongoing academic discussion about the question, if and to which extend the IF system affects financial stability. Belouafi et al (2015) made it their business to evaluate the pre-and post-subprime crisis literature on Islamic finance and the question of its impact on financial stability. They used some forty studies published over the last three decades, structuring them in theoretical and an empirical publications as well as along the pre-and post-sublime crisis timeline.…”

Section: Islamic Finance: Stable Growthmentioning

confidence: 99%

How Islamic Finance can affect the Financial Stability?

Taher

Kinski

2020

Preprint

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The subprime mortage crisis during the years 2007-2010 demonstrated the weaknesses of the conventional system of finance. The inherent speculative element of this system, which is fueled through the logic of interest additionally, brought attention to alternative approaches in order to recover control over the financial system. Islamic finance, a system relatively young in practice, contributed its part to the ongoing discussion on financial stability and has to present its own tools for this huge task. This paper wants to outline the ongoing theoretical discussion and empirical evidence concerning the question of financial stability and the role of Islamic finance in it. Main results found was Islamic finance has contributed to the overall financial stability. The survival of this financial system through the crisis of 2007-2008 has made it more and more interesting to investigate and to develop. The question of tradeoff between stability and profitability of this financial system remains under investigation as the conventional financial sector continues to be more profitable but less stable. The new avenue of the research channel in the financial sector could measure this tradeoff taking into account the future challenges.

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Islamic Finance and Financial Stability: A Review of the Literature?

Cited by 19 publications

References 0 publications

Panel modeling of z-score: evidence from Islamic and conventional Saudi banks

Panel modeling of z-score: evidence from Islamic and conventional Saudi banks

Stability Analysis Of Islamic Banking: Indonesia, Malaysia And Pakistan

How Islamic Finance can affect the Financial Stability?

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