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Islamic Banking: How Has it Diffused?

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Author Info

  • Patrick A. Imam
  • Kangni Kpodar

Abstract

This paper investigates the determinants of the pattern of Islamic bank diffusion around the world using country-level data for 1992 - 2006. The analysis illustrates that income per capita, share of Muslims in the population and status as an oil producer are linked to the development of Islamic banking, as are economic integration with Middle Eastern countries and proximity to Islamic financial centers. Interest rates have a negative impact on Islamic banking, reflecting the implicit benchmark for Islamic banks. The quality of institutions does not matter, probably because the often higher hurdle set by Shariah law trumps the quality of local institutions in most countries. The 9/11 attacks were not important to the diffusion of Islamic banking; but they coincided with rising oil prices, which are a significant factor in the diffusion of Islamic banking. Islamic banks also appear to be complements to, rather than substitutes for, conventional banks.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/195.

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Length: 100
Date of creation: 01 Aug 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/195

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Related research

Keywords: Islamic banking; Banking systems; Economic models; Financial systems; Interest rates; International banking;

This paper has been announced in the following NEP Reports:

References

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  1. Martin Čihák & Heiko Hesse, 2010. "Islamic Banks and Financial Stability: An Empirical Analysis," Journal of Financial Services Research, Springer, vol. 38(2), pages 95-113, December.
  2. Marcus Noland, 2003. "Religion, Culture, and Economic Performance," Working Paper Series WP03-8, Peterson Institute for International Economics.
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Citations

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Cited by:
  1. Joshua Charap & Serhan Cevik, 2011. "The Behavior of Conventional and Islamic Bank Deposit Returns in Malaysia and Turkey," IMF Working Papers 11/156, International Monetary Fund.
  2. Baele, Lieven & Farooq, Moazzam & Ongena, Steven, 2011. "Of Religion and Redemption: Evidence from Default on Islamic Loans," CEPR Discussion Papers 8504, C.E.P.R. Discussion Papers.
  3. Cagri S. Kumru & Saran Sarntisart, 2013. "Implications of Alternative Banking Systems," ANU Working Papers in Economics and Econometrics 2013-601, Australian National University, College of Business and Economics, School of Economics.
  4. Giorgio Gomel & Angelo Cicogna & Domenico De Falco & Marco Valerio Della Penna & Lorenzo Di Bona De Sarzana & Angela Di Maria & Patrizia Di Natale & Alessandra Freni & Sergio Masciantonio & Giacomo Od, 2010. "Islamic finance and conventional financial systems. Market trends, supervisory perspectives and implications for central banking activity," Questioni di Economia e Finanza (Occasional Papers) 73, Bank of Italy, Economic Research and International Relations Area.
  5. Hassan Ghassan & Stefano Fachin & Abdelkarim Guendouz, 2013. "Financial Stability of Islamic and Conventional Banks in Saudi Arabia: a Time Series Analysis," DSS Empirical Economics and Econometrics Working Papers Series 2013/1, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.
  6. Baele, L. & Farooq, M. & Ongena, S., 2012. "Of Religion and Redemption: Evidence from Default on Islamic Loans (Replaces CentER DP 2010-136)," Discussion Paper 2012-014, Tilburg University, Center for Economic Research.

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