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Financial Intermediation Costs In A Dual Banking System: The Role Of Islamic Banking

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  • Mansor H. Ibrahim

    (International Centre for Education in Islamic Finance)

  • Siong Hook Law

    (Universiti Putra Malaysia)

Abstract

This paper empirically analyses the role of Islamic banking in financial intermediation costs as measured by net interest margins for a leading dual banking country, Malaysia. Controlling for theoretically motivated determinants of the margins, the paper compares the interest/financing margins of conventional and Islamic banks and examines the impacts of Islamic banking presence on bank margins. The analysis provides evidence of the higher margins of Islamic banks compared to those of conventional banks.

Suggested Citation

  • Mansor H. Ibrahim & Siong Hook Law, 2019. "Financial Intermediation Costs In A Dual Banking System: The Role Of Islamic Banking," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 22(4), pages 531-552.
  • Handle: RePEc:idn:journl:v:22:y:2019:i:4g:p:531-552
    DOI: https://doi.org/10.21098/bemp.v22i4.1236
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