Performance differences between Islamic and conventional banking forms
-
Author(s)Turki AlshammariLink to ORCID Index: https://orcid.org/0000-0003-2034-6802
-
DOIhttp://dx.doi.org/10.21511/bbs.12(3-1).2017.08
-
Article InfoVolume 12 2017, Issue #3, pp. 237-246
- Cited by
- 999 Views
-
596 Downloads
This work is licensed under a
Creative Commons Attribution-NonCommercial 4.0 International License
This paper strives to recognize the possible performance differences between the two popular banking forms in the Gulf Cooperation Council (GCC) countries. Applying different methodologies on the data that span the period 2003–2015, this study docu¬ments significant differences with respect to the period, countries, and performance measures. Specifically, conventional banks in GCC countries outperform their Islamic counterparts in profitability. Also, bank specific factors such as liquidity, capital ad¬equacy, bank size and growth all affect the profitability. In addition, GCC conventional and Islamic banks were isolated from the 2008 subprime crisis even though their prof¬itability seems to be decayed differently over the period of the economic downturn.
- Keywords
-
JEL Classification (Paper profile tab)G21, D02
-
References18
-
Tables6
-
Figures0
-
- Table 1. Number of all banks, total assets (in US$), number of conventional banks and the percentage of total assets in conventional banks
- Table 2. Performance differences between conventional and Islamic banks in the GCC countries
- Table 3. ROA mean difference before and during the 2008 subprime crisis
- Table 4. Mean differences of some financial ratios that relate to both conventional and Islamic banks
- Table 5. The effect of sources of profitability for banks in Kuwait, Saudi Arabia and Emirates (2011–2015)
- Table 6. The effect of home country, 2008 subprime crisis and bank type on bank profitability of GCC banks (2011–2015)
-
- Alsaratwi, A. (2013). The governance effect on the performance of Islamic and conventional GCC banks. Ataawun Journal, 79, 66-90.
- Altamimi, H., Miniaoui, H., & Elkelish, W. (2015). Financial risk and Islamic banks’ performance in the gulf cooperation council countries. The International Journal of Business and Finance Research, 9(5), 103-112.
- Altamimi H. (2010). Factors influencing performance of the UAE Islamic and conventional national banks. Global Journal of Business Research, 4(2), 1-9.
- Almanaseer, M. (2014). The impact of the financial crisis on the Islamic banks profitability - evidence from GCC. Journal of Business Research, 5(3), 176-187.
- Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank specific, industry specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money, 18(2), 121-136.
- Bank Negara Malaysia (2017). Islamic Financial Services Industry Stability Report.
- Beck, T., Kunt, A., & Merrouche, O. (2010). Islamic vs. conventional banking business model, efficiency and stability. Journal of Banking and Finance, 37(2), 433-447.
- Cihak, M., & Hesse, H. (2010). Islamic banks and financial stability: an empirical analysis. Journal of Financial Services Research, 38(2), 95-113
- Cornett, M., Guo, L., Khaksari, Sh., & Tehranian H. (2010), The impact of state ownership on performance differences in privately-owned versus state-owned banks: an international comparison. Journal of Financial Intermediation, 19(1), 74-94.
- Ernst & Young (2013). World Islamic Banking Competitiveness Report. 2013–2014: the Transition Begins.
- Goddard, J., Molyneux, P., & Wilson, J. (2004). Dynamic of growth and profitability in banking. Journal of Money, Credit and Banking, 36(6), 1069-1090.
- Heffernan, S., & Fu, M. (2008). The determinants of bank performance in China (Working Paper Series, (WP-EMG-03-2008), Cass Business School, City University, UK).
- Hussein, M., Alam, M., & Wahid, M. (2014). The performance of Islamic banks during the 2008 global financial crisis: evidence from gulf cooperation council countries.
- Milhem, M., & Istaiteyeh, R. (2015). Financial performance of Islamic and conventional banks: evidence from Jordan. Global Journal of Business Research, 9(3), 27-41.
- Mollah, S., Hassan, M. K., Al Farooque, O., & Mobarek, A. (2017). the governance, risk-taking, and performance of Islamic banks. Journal of Financial Services Research, 51(2), 195-219.
- Peters, D., Raad, E., & Joseph, S. (2004). The performance of banks in post-war Lebanon. International Journal of Business, 9(3), 259-286.
- Shah, P. (2014). Performance analysis of selected Islamic and conventional banks of Pakistan through camel framework. Business & Economic Review, 6(1), 19-39.
- Tlemsani, I., & Alsuwaidi, H. (2016). Comparative analysis of Islamic and conventional banks in the UAE during the financial crisis. Asian Economic and Financial Review, 6(6), 298-309.
-
Positive contribution of the good corporate governance rating to stability and performance: evidence from Indonesia
RR. Iramani , Muazaroh Muazaroh , Abdul Mongid
doi: http://dx.doi.org/10.21511/ppm.16(2).2018.01
Problems and Perspectives in Management Volume 16, 2018 Issue #2 pp. 1-11 Views: 2980 Downloads: 251 TO CITE АНОТАЦІЯThis paper aims to examine the impact of Good Corporate Governance (GCG) practice on bank stability and performance. Governance is measured using the GCG rating that covers eleven aspects. The authors apply instrumental regression to link governance to performance and stability. The study covers a sample of 150 banks. The result shows that bank stability can mediate bank governance and bank performance. On the determinant of bank performance, it can be concluded that the GCG rating is positive and directly influences bank performance. Bank stability is also positive for bank performance indicating the indirect contribution of the GCG rating to bank performance. NPL, LDR, CAR and bank’s size (LASSET) are all negative and significant. The aim of this paper is to provide strong empirical evidence on the importance of governance and stability for performance. The limitations of this paper are the size of the sample and that it only covers public banks which are theoretically required to apply better governance in all aspects of their business by the Capital Market Authority.
-
Industrial development in Saudi Arabia: disparity in growth and development
Anis Ali
doi: http://dx.doi.org/10.21511/ppm.18(2).2020.03
Problems and Perspectives in Management Volume 18, 2020 Issue #2 pp. 23-35 Views: 2530 Downloads: 873 TO CITE АНОТАЦІЯIndustrial development in any nation plays a vital role in the strengthening of the economy and employs human resources as per specifications and directly towards the mainstream of the nation. In Saudi Arabia, there was rapid industrialization for four decades. Some manufacturing industries performed well, while some internal and external business environment factors influenced the others’ performance. The study focuses on historical development, as well as recent trends of well-performing and poor-performing industries of Saudi Arabia. Small manufacturing industries in Saudi Arabia are underdeveloped and need more attention to attain sustainable and progressive growth rate in the form of the number of establishments to enjoy the potential. Manufacture of tobacco, computer, electronics and optics, pharmaceuticals and transport equipment are the deprived and underdeveloped industries of the manufacturing sector. There should be some easy credit schemes for the development of deprived or underdeveloped manufacturing industries. To attain sustainable growth and development of the manufacturing sector, a positive attitude of the government towards underdeveloped manufacturing industries, favorable labor laws, and entrepreneurial awareness, technical and financial assistance are necessary. The growth and development of the manufacturing sector of Saudi Arabia will be helpful in the attainment of goals of Vision 2030.
-
Why banks should consider ESG risk factors in bank lending?
Sarwar Uddin Ahmed ,
Samiul Parvez Ahmed ,
Ikramul Hasan
doi: http://dx.doi.org/10.21511/bbs.13(3).2018.07
Banks and Bank Systems Volume 13, 2018 Issue #3 pp. 71-80 Views: 2505 Downloads: 977 TO CITE АНОТАЦІЯWhy banks should be concerned about incorporating environmental, social and governance (ESG) criteria in the lending process? What is the motivation? This study aims to find the motives for considering environmental, social and governance (ESG) criteria in bank lending process. A primary survey has been conducted to know the current status and motivation for incorporating ESG factors in investment decisions. Sample comprised 30 private commercial banks (PCBs) operating in Bangladesh. Data collected were analyzed with graphs, descriptive statistics, and regression analysis. Findings of the study indicate that banks are mostly considering basic environmental, social and governance factors set by regulators qualitatively. They are lagging behind in considering the advanced ESG criteria needed for sustainable and efficient credit risk management. Based on motivation for incorporating ESG factors, it was found that banks pioneering in incorporating ESG factors in lending decisions are compensated through better financial performance. Findings of the study are expected to encourage practitioners and policy-makers to take more pragmatic steps to incorporate ESG risk factors quantitatively in lending decision-making process.
