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The Effects of the Global Crisison Islamic and Conventional Banks

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  • Jemma Dridi
  • Maher Hasan
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    Abstract

    This paper examines the performance of Islamic banks (IBs) and conventional banks (CBs) during the recent global crisis by looking at 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 2008-09, contributing to financial and economic stability. External rating agencies‘ re-assessment of IBs‘ risk was generally more favorable.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/201.

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    Length: 46
    Date of creation: 01 Sep 2010
    Date of revision:
    Handle: RePEc:imf:imfwpa:10/201

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    Related research

    Keywords: Financial stability; Banking systems; Credit expansion; Financial assets; Global Financial Crisis 2008-2009; Islamic banking; Markets; Risk management; banking; islamic bank; islamic finance; islamic banks; sukuk; national bank; capital adequacy; musharakah; banking system; murabahah; banking sector; return on investment; investment bank; banks with assets; ijarah; return on equity; bank lending; bank deposits; bank ratings; bank assets; capital adequacy ratio; islamic development; banking industry; probability of default; return on assets; salam contract; level playing field; bank data; nonperforming loan; banking model; macroeconomic stability; banks assets; banking system assets; banking corporation; islamic banks assets; debt restructuring; shariah scholars; islamic principles; banking products; banking sectors; mudarabah; banking activities; banks ? balance sheet; islamic insurance; bank risk; investment banking; riba; bank capital; banking contracts; excess liquidity; wadiah; banking markets; murabahah transactions; takaful; islamic products; sale of debt; islamic banking activities; bank exposure; financial risk; islamic banking products; islamic law; islamic jurisprudence; islamic research; bankers; savings bank; acquisition cost; islamic view; islamic insurance companies;

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    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, Springer, vol. 38(2), pages 95-113, December.
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    Cited by:
    1. Michael, Bryane & Apostoloski, Nenad, 2012. "The Middle Eastern Wealth Management Industry: Boon or Bust?," MPRA Paper 52069, University Library of Munich, Germany.
    2. DIAW, Abdou, 2011. "La crise financière mondiale et la finance islamique: une revue de la litérature
      [The global financial crisis and Islamic finance: a review of selected literature]
      ," MPRA Paper 32754, University Library of Munich, Germany.
    3. Pejman Abedifar & Philip Molyneux & Amine Tarazi, 2013. "Risk in Islamic Banking," Review of Finance, European Finance Association, European Finance Association, vol. 17(6), pages 2035-2096.
    4. Nabi, Mahmoud Sami, 2012. "Dual Banking and Financial Contagion," MPRA Paper 49814, University Library of Munich, Germany.
    5. Aida Kammoun Abdelmoula & Asma Abidi, 2013. "The Effect of the Subprime Crisis on the Financing of Entrepreneurial Activities by Islamic Banks," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 77-90, November.
    6. Karim ben Khediri & Lanouar Charfeddine & Slah ben Youssef, 2014. "Islamic vs. conventional banks in the GCC countries: A comparative study using classification techniques," Working Papers, Department of Research, Ipag Business School 2014-505, Department of Research, Ipag Business School.
    7. Hasan, Zubair Hasan, 2014. "The recent turmoil and monetary policy in a dual financial system with Islamic perspective," MPRA Paper 57133, University Library of Munich, Germany.
    8. 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), Bank of Italy, Economic Research and International Relations Area 73, Bank of Italy, Economic Research and International Relations Area.

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