The Effects of the Global Crisis on Islamic and Conventional Banks: A Comparative Study

Abstract

This paper examines the performance of Islamic banks (IBs) and conventional banks (CBs) during the recent global crisis by examining the impact of the crisis on profitability, credit and asset growth, and external ratings in a group of countries where the two types of banks have significant market share. Our analysis suggests that IBs have been affected differently than CBs. Factors related to IBs' business model helped limit the adverse impact on profitability in 2008, while weaknesses in risk management practices in some IBs led to a larger decline in profitability in 2009 compared to CBs. IBs' credit and asset growth performed better than did that of CBs in 2008–2009, contributing to financial and economic stability. External rating agencies' re-assessment of IBs' risk was generally more favorable.

Funding Structure, Procyclicality and Lending: Evidence from GCC Banks

“…Robustness checks of the results based on alternate estimation techniques appear to lend credence to these findings. These findings are in congruence with recent research (Hasan and Dridi, 2010).…”

İslami̇ Fi̇nans Ve Ekonomi̇k Büyüme: Türki̇ye Üzeri̇ne Ekonometri̇k Bi̇r Uygulama

“…Ancak İslami para piyasaların-daki son gelişmelere bağlı olarak bu farklılıkların önemi belirli bir ölçüde azalmıştır. Özellikle yeni İslami para piyasası araçları ve birçok ülkede tüm bankalara likidite desteği sağlamaya yönelik taahhütler bu azalışta belirli bir rol oynamaktadır (Čihák, Hesse, 2010;Hasan, Dridi, 2010). İkincisi, İslami bankaların küçük ölçekli olması ve operasyonlarının genelde birkaç ülkede yoğunlaşmasıdır.…”

Islamic Banks, Deposit Insurance Reform, and Market Discipline: Evidence from a Natural Framework

“…Given the emphasis on equity financing, advocates of Islamic banking have argued that the deleveraged nature of Islamic banks contribute to the stability of the financial system (Khan and Mirakhor 1989, Ebrahim and Safadi 1995, Iqbal 1997. Čihák and Hesse (2010), Hasan and Dridi (2011) and Beck et al (2013), amongst others, provide empirical evidence that Islamic banks better withstand negative shocks than conventional banks. Instead of debt, the Islamic banking model introduces asset-backed financing instruments, where the investor's return is linked to the profit and loss of a pool of heterogeneous assets (Askari 2012).…”