Bank Credit in Uncertain Times: Islamic vs. Conventional Banks

13 Pages Posted: 8 Mar 2020

See all articles by Mehmet Huseyin Bilgin

Mehmet Huseyin Bilgin

Istanbul Medeniyet University

Gamze Ozturk Danisman

Kadir Has University

Ender Demir

Istanbul Medeniyet University

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science

Date Written: February 12, 2020

Abstract

This paper explores whether the impact of economic uncertainty on credit growth differs for Islamic vs. conventional banks. Using a sample of 416 banks (58 Islamic and 358 conventional) in 12 countries, the findings indicate that an increase in economic uncertainty significantly decreases the credit growth of conventional banks but does not have any significant impact on Islamic banks’ credit growth. Our results are robust to alternative specifications and addressing endogeneity concerns using GMM estimators. We further observe that our findings are stronger for the following countries: (1) countries with explicit deposit insurance protection system for Islamic banks, (2) lower foreign dominance, and (3) countries with a higher share of deposits and assets in Islamic banks.

Keywords: Economic Uncertainty, Credit, Islamic Banks, Conventional Banks

JEL Classification: E50, G21, D81, C23

Suggested Citation

Bilgin, Mehmet Huseyin and Danisman, Gamze Ozturk and Demir, Ender and Tarazi, Amine, Bank Credit in Uncertain Times: Islamic vs. Conventional Banks (February 12, 2020). Available at SSRN: https://ssrn.com/abstract=3537214 or http://dx.doi.org/10.2139/ssrn.3537214

Mehmet Huseyin Bilgin

Istanbul Medeniyet University ( email )

D-100 Karayolu
Merdivenkoy Mevkii No:6/1 Goztepe/Kadıkoy
Istanbul
Turkey

Gamze Ozturk Danisman

Kadir Has University ( email )

Istanbul
Turkey

Ender Demir (Contact Author)

Istanbul Medeniyet University ( email )

Cevizli Mahallesi, Gürbüz Sk. No:6,
İstanbul, 34685
Turkey

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science ( email )

5 rue Felix Eboue
Limoges, 87000
France

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