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Islamic Banks and Financial Stability: An Empirical Analysis
Author:
Mr. Martin Cihak
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https://orcid.org/0000-0002-3571-9707
and
Mr. Heiko Hesse
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Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 016
Language:
English
Publication Date:
01 Jan 2008
DOI:
https://doi.org/10.5089/9781451868784.001
ISBN:
9781451868784
ISSN:
1018-5941
Pages:
29
Keywords:
WP; bank; commercial bank; macroeconomic variable; market share
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The relative financial strength of Islamic banks is assessed empirically based on evidence covering individual Islamic and commercial banks in 18 banking systems with a substantial presence of Islamic banking. We find that (i) small Islamic banks tend to be financially stronger than small commercial banks; (ii) large commercial banks tend to be financially stronger than large Islamic banks; and (iii) small Islamic banks tend to be financially stronger than large Islamic banks, which may reflect challenges of credit risk management in large Islamic banks. We also find that the market share of Islamic banks does not have a significant impact on the financial strength of other banks.
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IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund