Islamic vs. Conventional Banking: Business Model, Efficiency and Stability

By Thorsten Beck, Asli Demirgüç-Kunt, O. Merrouche. 2010

113 citations recorded by the source corpus.

This paper discusses Islamic banking products and interprets them in the context of financial intermediation theory. Anecdotal evidence shows that many of the conventional products can be redrafted as Sharia-compliant products, so that the differences are smaller than expected. Comparing conventional and Islamic banks and controlling for other bank and country characteristics, the authors find few significant differences in business orientation, efficiency, asset quality, or stability. While Islamic banks seem more cost-effective than conventional banks in a broad cross-country sample, this finding reverses in a sample of countries with both Islamic and conventional banks. However, conventional banks that operate in countries with a higher market share of Islamic banks are more cost-effective but less stable. There is also consistent evidence of higher capitalization of Islamic banks and this capital cushion plus higher liquidity reserves explains the relatively better performance of Islamic banks during the recent crisis.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/a3499a41ff47d39ff2c764716e83cc04add470f9

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Citations in the corpus

Higher Ethical Objective (Maqasid al-Shari’ah) Augmented Framework for Islamic Banks: Assessing Ethical Performance and Exploring Its Determinants (2019, methodology): “All these variables have been utilized in several studies such as Beck et al. (2013), Zouari and Taktak (2012), and Rizkiningsih and Dewi (2015).”
Finance-Growth Nexus and Dual-Banking Systems: Relative Importance of Islamic Banks (2016, methodology): “Following Beck et al. (2013), we split Islamic banks into three categories: Small , Medium and Large .”
Do Islamic Banks Employ Less Earnings Management (2013, unknown): “However, one notable phenomenon is that Islamic banks have not been severely affected by the current financial crisis (e.g., Hasan and Dridi 2010; Beck et al. 2010).”
How oil prices, gold prices, uncertainty and risk impact Islamic and conventional stocks? Empirical evidence from QARDL technique (2020, background): “Islamic Finance got significance as a separate asset class during the Subprime crisis or Global Financial Meltdown (see Chapra, 2011; Hasan and Dridi, 2010; Beck et al., 2010).”
The governance, risk-taking, and performance of Islamic banks (2016, unknown): “We then filter the remaining banks with an independence indicator defined by Bureau van Dijk (BvD) as equal to A or B. 7 Next, by following Beck et al. (2013), we filter the remaining banks based on three principles: (1) countries having both Islamic and conventional banks; (2) countries with at…”
A Survival Analysis of Islamic and Conventional Banks (2016, unknown): “…represented, and it is somewhat more representative of the Islamic banking sector than those in previous studies because it contains 106 Islamic banks (25% of all banks sampled) whereas the studies by Čihák and Hesse (2010), Abedifar et al. (2012), and Beck et al. (2013) contain 77 (16%), 101 (22”