The Effects of the Global Crisis on Islamic and Conventional Banks: A Comparative Study

47 Pages Posted: 1 Feb 2011

See all articles by Maher Mohamad Hasan

Maher Mohamad Hasan

International Monetary Fund (IMF)

Jemma Dridi

International Monetary Fund (IMF)

Date Written: September 2010

Abstract

This paper examines the performance of Islamic banks (IBs) and conventional banks (CBs) during the recent global crisis by looking at 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 2008-09, contributing to financial and economic stability. External rating agencies‘ re-assessment of IBs‘ risk was generally more favorable.

Keywords: Banking systems, Banks, Competition, Credit expansion, Financial assets, Financial crisis, Global Financial Crisis 2008-2009, Islamic banking, Markets, Profit margins, Risk management

Suggested Citation

Hasan, Maher Mohamad and Dridi, Jemma, The Effects of the Global Crisis on Islamic and Conventional Banks: A Comparative Study (September 2010). IMF Working Paper No. 10/201, Available at SSRN: https://ssrn.com/abstract=1750689

Maher Mohamad Hasan (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jemma Dridi

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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