Front Matter Page

IMF Country Report No. 17/145

MULTI-COUNTRY REPORT

ENSURING FINANCIAL STABILITY IN COUNTRIES WITH ISLAMIC BANKING—CASE STUDIES—PRESS RELEASE; STAFF REPORT

June 2017

IMF staff regularly produces papers covering multilateral issues and cross-country analysis. The following documents have been released and are included in this package:

• A Press Release summarizing the views of the Executive Board as expressed during its February 3, 2017 consideration of the staff report

• The Staff Report prepared by IMF staff and completed on January 6, 2017 for the Executive Board’s consideration on February 3, 2017.

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090

Telephone: (202) 623-7430 • Fax: (202) 623-7201

E-mail: publications@imf.org Web: http://www.imf.org

Price: $18.00 per printed copy

International Monetary Fund

Washington, D.C.

© 2017 International Monetary Fund

Front Matter Page

ENSURING FINANCIAL STABILITY IN COUNTRIES WITH ISLAMIC BANKING–COUNTRY CASE STUDIES

January 6, 2017

Approved By

Aasim M. Husain and Aditya Narain

Contents

• Glossary

• INTRODUCTION

• BAHRAIN

• A. Overview of the Islamic Finance Industry

• B. Islamic Banks’ Operations and Soundness

• C. The Regulatory and Supervisory Framework

• D. Liquidity Management, Resolution and Deposit Insurance

• E. Conclusions and Policy Issues

• DJIBOUTI

• A. Overview of the Islamic Finance Industry

• B. Islamic Banks’ Operations and Soundness

• C. The Regulatory and Supervisory Framework

• D. Liquidity Management, Resolution, and Deposit Insurance

• E. Conclusions and Policy Options

• INDONESIA

• A. Overview of the Islamic Finance Industry

• B. Islamic Banks’ Operations and Soundness

• C. The Regulatory and Supervisory Framework

• D. Liquidity Management, Resolution and Deposit Insurance

• E. Conclusions and Policy Options

• KENYA

• A. Overview of the Islamic Finance Industry

• B. Islamic Banks’ Operations and Soundness

• C. The Regulatory and Supervisory Framework

• D. Liquidity Management, Resolution, and Deposit Insurance

• E. Conclusions and Policy Issues

• KUWAIT

• A. Overview of the Islamic Finance Industry

• B. Islamic Banks’ Operations and Performance

• C. The Regulatory and Supervisory Framework

• D. Liquidity Management, Resolution, and Deposit Insurance

• E. Conclusions and Policy Issues

• MALAYSIA

• A. Overview of the Islamic Finance Industry

• B. Islamic Banks’ Operations and Soundness

• C. The Regulatory and Supervisory Framework

• D. Liquidity Management, Resolution, and Deposit Insurance

• E. Conclusions and Policy Issues

• NIGERIA

• A. Overview of the Islamic Finance Industry

• B. Interest Free Banks’ Operations and Soundness

• C. The Regulatory and Supervisory Framework

• D. Liquidity Management, Resolution and Deposit Insurance

• E. Conclusions and Policy Issues

• PAKISTAN

• A. Overview of the Islamic Finance Industry

• B. Islamic Banks’ Operations and Soundness

• C. The Regulatory and Supervisory Framework

• D. Liquidity Management, Resolution, and Deposit Insurance

• E. Conclusions and Policy Issues

• SUDAN

• A. Overview of the Islamic Finance Industry

• B. Islamic Banks’ Operations and Soundness

• C. The Regulatory and Supervisory Framework

• D. Liquidity Management, Resolution, and Deposit Insurance

• E. Conclusions and Policy Issues

• TURKEY

• A. Overview of the Islamic Finance Industry

• B. Participation Banks’ Operations and Soundness

• C. The Regulatory and Supervisory Framework

• D. Liquidity Management, Resolution, and Deposit Insurance

• E. Conclusions and Policy Issues

• UNITED KINGDOM (UK)

• A. Overview of the Islamic Finance Industry

• B. Recent Developments

• C. The Regulatory and Supervisory Framework

• D. Conclusions and Policy Issues

• BOXES

• 1. Indonesia: Structure of the Shari’ah-compliant FX hedging instrument

• 2. Malaysia: Treatment of Profit Sharing Investment Accounts

• 3. Nigeria: The History of Interest-Free Banking

• FIGURES

• 1. Bahrain: Structure of the Islamic Finance Industry and Bank Balance Sheets

• 2. Bahrain: Sources of Funding and Islamic Banks’ Performance

• 3. Djibouti: Structure of the Islamic Finance Industry and Bank Balance Sheets

• 4. Djibouti: Sources of Funding and Islamic Banks’ Performance

• 5. Indonesia: Structure of the Islamic Finance Industry and Bank Balance Sheets,

• 6. Indonesia: Sources of Funding and Islamic Banks’ Performance

• 7. Kenya: Structure of the Islamic Finance Industry and Bank Balance Sheets

• 8. Kenya: Sources of Funding and Islamic Banks’ Performance

• 9. Kuwait: Structure of the Islamic Finance Industry and Bank Balance Sheets

• 10. Kuwait: Sources of Funding and Islamic Banks’ Performance

• 11. Malaysia: Structure of the Islamic Finance Industry and Bank Balance Sheets

• 12. Malaysia: Sources of Funding and Islamic Banks’ Performance

• 13. Nigeria: Structure of the Islamic Finance Industry and Bank Balance Sheets

• 14. Nigeria: Sources of Funding and Islamic Banks’ Performance

• 15. Pakistan: Structure of the Islamic Finance Industry and Bank Balance Sheets

• 16. Pakistan: Sources of Funding and Islamic Banks’ Performance

• 17. Sudan: Structure of the Islamic Finance Industry and Bank Balance Sheets

• 18. Sudan: Sources of Funding and Islamic Banks’ Performance

• 19. Turkey: Structure of the Islamic Finance Industry and Bank Balance Sheets

• 20. Turkey: Sources of Funding and Islamic Banks’ Performance

• 21. UK: Islamic Finance Development in OECD Countries, 2014

• TABLES

• 1. Key Instruments of Islamic Finance

• 2. UK: Key Financial Ratios for Islamic Banking

• References

• ANNEX

• I. Risk Profile of Islamic Banks

Glossary