How Did Islamic Banks Do During Global Financial Crisis?

Banks and Bank Systems, Vol. 5, Issue 4, pp. 54-62, 2010

9 Pages Posted: 7 Jul 2011

See all articles by Sat Paul Parashar

Sat Paul Parashar

Bahrain Institute of Banking & Finance (BIBF); University of California, San Diego (UCSD)

Date Written: September 30, 2010

Abstract

It is generally argued that Islamic banks are safer than conventional banks. The prime reason is their product structure that is essentially asset-backed financing. Research studies prior to recent global financial crisis have generally concluded that the performance of Islamic banks have been better than conventional banks. There are, however, others who have argued that their history is too young to authentically conclude. The recent global financial crisis has brought this question to the fore once more. It is well known that conventional banks have suffered everywhere on this planet during the recent crisis, only the degree and the bounce back differ. What about Islamic banks? How did they do during crisis? This study shows that Islamic banks have suffered more than conventional banks during recent global financial crisis in terms of capital ratio, leverage and return on average equity, while conventional banks have suffered more than Islamic banks in terms of return on average assets and liquidity. Over the four years period, i.e. 2006-2009, Islamic banks performed better than conventional banks.

Keywords: Islamic banks, conventional banks, capital adequacy, global financial crisis, bank performance

JEL Classification: G21

Suggested Citation

Parashar, Sat Paul, How Did Islamic Banks Do During Global Financial Crisis? (September 30, 2010). Banks and Bank Systems, Vol. 5, Issue 4, pp. 54-62, 2010. Available at SSRN: https://ssrn.com/abstract=1878564

Sat Paul Parashar (Contact Author)

Bahrain Institute of Banking & Finance (BIBF) ( email )

PO Box 20525
Manama
Manama, 0340
Bahrain

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
1,522
rank
11,084
Abstract Views
4,183
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information