The behavior of Islamic and conventional banks around the pandemic: cross-country evidence

Abstract

PurposeUsing cross-country data on the 1,000 largest global banks for 2019, the paper aims to examine the response of bank risk and returns to the pandemic.Design/methodology/approachThe author employs weighted least squares (WLS) techniques for the purposes of analysis.FindingsThe findings suggest that banks with Islamic windows increased their riskiness in response to the pandemic, although there was not much impact on profitability. Additionally, the author categorizes banks based on certain major characteristics and find that these findings are manifest primarily for well-capitalized and less liquid banks.Originality/valueResearch as to the impact of the pandemic on banks' balance sheets has been an unaddressed area of research. By focusing on a large sample of banks across countries with both Islamic and conventional banking presence, the analysis sheds light on the balance sheet response of banks to the pandemic, an aspect that has not been addressed earlier.

Beyond the Crisis: Tracking SME Non-Performing Loan in Indonesia Before and After the COVID-19 Stimulus

“…The determinants of non-performing financing in Islamic banks, particularly in the Small-Medium Enterprises (SMEs) sector, have been analyzed to understand the impact of the pandemic on bank operations and financial health (Malim & Normalini, 2018) (Albaity et al, 2022) (Fakhri & Darmawan, 2021). Measures of profitability levels, customer satisfaction, and the interaction of digital services in Islamic banking have been studied to assess the resilience and performance of Islamic banks amidst the pandemic (Fakhrunnas & Hasanah, 2022) (Ghosh, 2023). Comparative studies on financial performance between Islamic and conventional banking during the COVID-19 pandemic have provided insights into the unique challenges and opportunities faced by Islamic financial institutions.…”