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Financial Stability: The Significance and Distinctiveness of Islamic Banking in Malaysia

In: Minsky, Crisis and Development

Author

Listed:
  • Ewa Karwowski

Abstract

Islamic banking is perceived to be at its ‘tipping point’ turning from a niche market phenomenon into a mainstream product (BBC, 2006; Credit Suisse, 2006). Although the total international assets of Islamic banks are still marginal, growth rates are phenomenal especially in the Middle East and Southeast Asia. Yet, Islamic banking seems incomprehensible to most Western economists. As discussed below due to the prohibition of interest and collateral Islamic banking is hardly reconcilable with Western economic theory dominated by the asymmetric information paradigm. Islamic scholars, however, claim that it is superior to conventional banking mainly due to the inherent stability of Islamic banking in reducing economic fluctuations and recurring crisis. The third section shows that these claims are questionable.

Suggested Citation

  • Ewa Karwowski, 2010. "Financial Stability: The Significance and Distinctiveness of Islamic Banking in Malaysia," Palgrave Macmillan Books, in: Daniela Tavasci & Jan Toporowski (ed.), Minsky, Crisis and Development, chapter 12, pages 207-244, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-29232-1_13
    DOI: 10.1057/9780230292321_13
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    Cited by:

    1. Lassoued, Mongi, 2018. "Comparative study on credit risk in Islamic banking institutions: The case of Malaysia," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 267-278.
    2. 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.

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