Journal of International Commerce Economics and Policy · 2011 · 506 citations · 1 references
BusinessFinanceRisk ManagementBankingFinancial EconomicsFinancial Risk ManagementBank Risk ManagementCommercial BankingCredit RiskFinancial CrisesFinancial RiskIslamic BankingAsset Growth AnalysisBank Performance MeasurementGlobal Financial CrisisIslamic Banking Market ShareIslamic Banking PerformanceIslamic Banking ProfitabilityIslamic Banking Risk ManagementMarket Share
The study compares the performance of Islamic and conventional banks during the recent global crisis, focusing on profitability, credit and asset growth, and external ratings. It does so by examining these metrics across countries where both bank types hold significant market share. Islamic banks were affected differently than conventional banks, with their business model limiting the adverse impact on profitability in 2008, but weaknesses in risk management leading to a larger decline in 2009, while their credit and asset growth outperformed conventional banks during 2008–2009, contributing to financial and economic stability, and external rating agencies reassessed IBs' risk more favorably.
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.
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