What is it about?
The aim of this paper is to examine whether Islamic finance could be an alternative to the traditional financial system and could guarantee stability in times of crisis.
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Why is it important?
The results indicate that bank size and capital are the main factors responsible for increasing profitability and stability of Islamic banks and reducing their credit risk. However, the ratios forming the variable liquidity and asset quality often lead to inconclusive results. It is also found that macroeconomic variables, except inflation, are able to improve Islamic banks’ stability. This is not the case for credit risk where the ratio is still unfavorable.
Perspectives
The conclusion is that there are no major differences between Islamic Banks and Conventional Banks in terms of their profitability and risk features.
Professor Mohamed Ali Trabelsi
Faculty of Economics and Management of Tunis, University of Tunis El Manar
Read the Original
This page is a summary of: Risk and profitability of Islamic banks: A religious deception or an alternative solution?, European Research on Management and Business Economics, January 2017, Elsevier,
DOI: 10.1016/j.iedeen.2016.09.001.
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