Economics at your fingertips  

Financial soundness of single versus dual banking system: explaining the role of Islamic banks

Nosheen () and Abdul Rashid ()
Additional contact information
Nosheen: National University of Sciences and Technology (NUST)

Portuguese Economic Journal, 2021, vol. 20, issue 1, No 5, 99-127

Abstract: Abstract This paper empirically investigates the financial stability of the countries having both Islamic and conventional banks versus the countries having only conventional banks. It also examines the ability of Islamic banks to provide stability to the overall financial system. The analysis is carried out for a sample of 416 banks drawn from 39 countries over the period 1995–2014. The results provide sound evidence that the dual banking system is more stable than the single banking system. Higher stability is attributed to the presence of Islamic banks in the dual banking system. Furthermore, when only the dual banking system is investigated, the results strongly confirm the greater stability of Islamic banks as compared to their conventional counterparts. Although Islamic banks are mimicking conventional banking practices, their increased interactions with the real economy, investments in real assets, non-aggressive lending profile, and limited exposures to speculative activities make them more resilient and protected.

Keywords: Financial stability; Islamic banks; Conventional banks; Dual banking system; Differential impact; System GMM; G20; G21; Z12 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10258/PS2

DOI: 10.1007/s10258-019-00171-2

Access Statistics for this article

Portuguese Economic Journal is currently edited by Luís F. Costa

More articles in Portuguese Economic Journal from Springer, Instituto Superior de Economia e Gestao
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2023-11-13
Handle: RePEc:spr:portec:v:20:y:2021:i:1:d:10.1007_s10258-019-00171-2