The Impact of COVID-19 Pandemic on Islamic and Conventional Banks’ Profitability

Sayyed Sadaqat Hussain Shah, Ştefan Gherghina, Rui Miguel Dantas, Saliha Rafaqat, Anabela Batista Correia and Mário Nuno Mata
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Sayyed Sadaqat Hussain Shah: Department of Commerce and Finance, Government College, University Lahore, Lahore 54000, Pakistan
Rui Miguel Dantas: ISCAL-Instituto Superior de Contabilidade e Administração de Lisboa, Instituto Politécnico de Lisboa, Avenida Miguel Bombarda 20, 1069-035 Lisbon, Portugal
Saliha Rafaqat: Department of Commerce and Finance, Government College, University Lahore, Lahore 54000, Pakistan
Anabela Batista Correia: ISCAL-Instituto Superior de Contabilidade e Administração de Lisboa, Instituto Politécnico de Lisboa, Avenida Miguel Bombarda 20, 1069-035 Lisbon, Portugal
Mário Nuno Mata: ISCAL-Instituto Superior de Contabilidade e Administração de Lisboa, Instituto Politécnico de Lisboa, Avenida Miguel Bombarda 20, 1069-035 Lisbon, Portugal

Economies, 2023, vol. 11, issue 4, 1-17

Abstract: The banking sector has a significant impact on a nation’s financial stability and economic development. As one of the fundamental components of the financial sector, banks offer services that are essential for the expansion of the markets. The stability of the financial system is significantly impacted by the efficiency of the banking sector. COVID-19 has had a tremendous effect on the economy. This pandemic cannot be disregarded, considering how widespread it has been and how many people it has affected globally. Both society and the global economy have undergone profound change. Hence, it is critical to ascertain how severely the outbreak has impacted the banking system. To assess the potential impact of pandemic, the current study examined conventional and Islamic banking. This study also investigates how COVID-19’s moderating effect influences the banking system. Financial statements from 10 conventional banks and 5 Islamic banks in Pakistan are the sources of this study’s sample data. COVID-19 is a moderator in this study. The empirical estimations by means of the fixed-effects approach suggests that the moderator has a large impact on bank profitability. In addition, COVID-19 appears to have a stronger influence on the Islamic banking system.

Keywords: COVID-19; Islamic vs. conventional; bank profitability; fixed-effects estimation (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2023
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