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Bank credit in uncertain times: Islamic vs. conventional banks

Mehmet Bilgin (), Gamze Danisman (), Ender Demir () and Amine Tarazi
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Gamze Danisman: Faculty of Management, Kadir Has University, Istanbul, Turkey

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Abstract: This paper explores whether the impact of economic uncertainty on credit growth differs for Islamic vs. conventional banks. Using a sample of 416 banks (58 Islamic and 358 conventional) in 12 countries, the findings indicate that an increase in economic uncertainty significantly decreases the credit growth of conventional banks but does not have any significant impact on Islamic banks' credit growth. Our results are robust to alternative specifications and addressing endogeneity concerns using GMM estimators. We further observe that our findings are stronger for the following countries: (1) countries with explicit deposit insurance protection system for Islamic banks, (2) lower foreign dominance, and (3) countries with a higher share of deposits and assets in Islamic banks.

Keywords: Conventional Banks; Economic Uncertainty; Islamic Banks; Credit (search for similar items in EconPapers)
Date: 2020-02-12
New Economics Papers: this item is included in nep-fdg and nep-isf
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Working Paper: Bank credit in uncertain times: Islamic vs. conventional banks (2020)
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