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The Effects Of The Global Crisis On Islamic And Conventional Banks: A Comparative Study

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  • MAHER HASAN

    (Monetary and Capital Market Department, Middle East and Central Asia Department, International Monetary Fund, USA)

  • JEMMA DRIDI

    (Monetary and Capital Market Department, Middle East and Central Asia Department, International Monetary Fund, USA)

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.

Suggested Citation

  • Maher Hasan & Jemma Dridi, 2011. "The Effects Of The Global Crisis On Islamic And Conventional Banks: A Comparative Study," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(02), pages 163-200.
    • Handle: RePEc:wsi:jicepx:v:02:y:2011:i:02:n:s1793993311000270
    DOI: 10.1142/S1793993311000270
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    References listed on IDEAS

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    1. Martin Čihák & Heiko Hesse, 2010. "Islamic Banks and Financial Stability: An Empirical Analysis," Journal of Financial Services Research, Springer;Western Finance Association, vol. 38(2), pages 95-113, December.
    2. Patrick A. Imam & Mr. Kangni R Kpodar, 2010. "Islamic Banking: How Has it Diffused?," IMF Working Papers 2010/195, International Monetary Fund.
    3. Munawar Iqbal & David T. Llewellyn (ed.), 2002. "Islamic Banking and Finance," Books, Edward Elgar Publishing, number 2499.
    4. Mohammad Umer Chapra, 2009. "The Global Financial Crisis: Can Islamic Finance Help? الأزمة المالية العالمية: هل يساعد التمويل الإسلامي؟," Chapters of books published by the Islamic Economics Institute, KAAU or its faculty members., in: Islamic Economics Institute (ed.),Issues in the International Financial Crisis from an Islamic Perspective-05 قضايا في الأزمة المالية العالمية من منظور إسلامي, edition 1, chapter 2, pages 11-18, King Abdulaziz University, Islamic Economics Institute..
    5. Duvvuri Subbarao, 2009. "Ethics and the World of Finance," Working Papers id:2201, eSocialSciences.
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    More about this item

    Keywords

    Islamic banks; conventional banks; financial stability; financial crisis; regression analysis; G20; G21; G28; G32;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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