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Islamic Finance and Financial Stability: A Review of the Literature التمويل الإسلامي والاستقرار المالي: مراجعة الأدبيات النظرية

Author

Listed:
  • Ahmed Mahdi Belouafi

    (Associate Professor, Islamic Economics Institute (IEI) King Abdulaziz University, Jeddah)

  • Chaouki Bourakba

    (2Assistant Professor, Imam Muhammad Ibn Saud Islamic University, Riyadh, Saudi Arabia)

  • Karima Saci

    (Assistant Professor, Dar Al-Hikmat University, Jeddah, Saudi Arabia)

Abstract

This paper provides a critical review of the Islamic Economics (IEs) and Finance (IF) literature that have examined the stability of the Islamic Financial System (IFS) and its institutions vis-à-vis the conventional interest-based system. The paper analyzes forty studies over the last thirty-year period (1983-2013). Two sub-periods: pre-and post-subprime financial crisis are compared. The pre-crisis period focuses on theoretical investigations while the post-crisis focuses on empirical research. The results show that the crisis seems to have triggered more attention to the stability of IF. Seventy five percent of the reviewed literature has been carried out in the post-crisis era; about five studies have been produced per year during the last five years (2008-2013) in contrast to less than one study per year in its antecedent period. In addition, Z-score indicator has come out as the most commonly used proxy for measuring the stability of Islamic financial intermediaries. The results also show that there is a significant divergence between the theory and practice of IF. Theoretical studies claim the ‘superiority’ of the IFS based primarily on equity and participatory modes of financing, while empirical studies are not yet conclusive. تستعرض هذه الورقة مراجعة نقدية لأدبيات الاقتصاد والتمويل الإسلامي التي تناولت موضوع استقرار النظام المالي الإسلامي ومؤسساته مقارنة مع النظام المالي التقليدي القائم على الفائدة (الربا). تقدم الورقة تحليلاً لأربعين دراسة على مدى ثلاثين سنة الماضية (1983-2013م). وقد تم فيها مقارنة فترتين فرعيتين: ما قبل الأزمة المالية العالمية (أزمة الرهن العقاري الأمريكية)، وما بعدها. لقد طغى على فترة ما قبل الأزمة الدراسات النظرية، في حين طغت البحوث التجريبية على فترة ما بعد الأزمة. أظهرت النتائج أن الأزمة يبدو أنها تكون قد لعبت دورًا هامًا في إيلاء مزيد من الاهتمام لمسألة استقرار التمويل الإسلامي ومؤسساته؛ حيث إن خمسة وسبعين في المئة من الأدبيات المستعرضة أُجريت في فترة ما بعد الأزمة. فقد تم إصدار حوالي خمس دراسات سنوياً خلال الفترة 2008-2013م، مقارنة بإجراء أقل من دراسة واحدة في السنة في الفترة التي قبلها. وأظهرت النتائج اختلافا كبيرًا بين النظرية والتطبيق في التمويل الإسلامي. تزعم الدراسات النظرية "تفوق" النظام المالي الإسلامي القائم – بشكل رئيس- على أدوات التمويل المبنية على المشاركة في تقاسم المغانم والمغارم، في حين تُظهر أن الدراسات التجريبية نتائج متباينة.

Suggested Citation

  • Ahmed Mahdi Belouafi & Chaouki Bourakba & Karima Saci, 2015. "Islamic Finance and Financial Stability: A Review of the Literature التمويل الإسلامي والاستقرار المالي: مراجعة الأدبيات النظرية," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 28(2), pages 3-42, July.
    • Handle: RePEc:abd:kauiea:v:28:y:2015:i:2:no:1:p:3-42
    DOI: 10.4197/Islec.28-2.1
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    References listed on IDEAS

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    Cited by:

    1. Hassan, M. Kabir & Aliyu, Sirajo, 2018. "A contemporary survey of islamic banking literature," Journal of Financial Stability, Elsevier, vol. 34(C), pages 12-43.
    2. Ghassan, Hassan B. & Krichene, Noureddine, 2017. "Financial Stability of Conventional and Islamic Banks: A Survey," MPRA Paper 82372, University Library of Munich, Germany.
    3. Delle Foglie, Andrea & Panetta, Ida Claudia, 2020. "Islamic stock market versus conventional: Are islamic investing a ‘Safe Haven’ for investors? A systematic literature review," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    4. Ahmed Belouafi, 2020. "Reforming Islamic Finance Industry: Where from? .. Where to? إصلاح صناعة التمويل الإسلامي: من أين؟ .. وإلى أين؟," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 121-136, July.
    5. Andrea Delle Foglie & Gianni Pola, 2021. "Make the Best from Comparing Conventional and Islamic Asset Classes: A Design of an All-Seasons Combined Portfolio," JRFM, MDPI, vol. 14(10), pages 1-17, October.
    6. Sakarya, Burchan, 2016. "Financial Stability of Islamic (Participation) Banks in Turkey," MPRA Paper 69451, University Library of Munich, Germany.

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    More about this item

    Keywords

    Islamic finance; financial stability; Z-score; GARCH; financial ratios.;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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