Cyclicality of bank credit growth: Conventional vs Islamic banks in the GCC

Albaity, Mohamed and Md. Noman, Abu Hanifa and Mallek, Ray Saadaoui and Al-Shboul, Mohammad (2022) Cyclicality of bank credit growth: Conventional vs Islamic banks in the GCC. Economic Systems, 46 (1). DOI

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Using a panel of 104 banks from the six Gulf Council Countries, we investigate the cyclicality of credit growth with regard to the discrepancies between Islamic banks and conventional banks. We found that Islamic banks are pro-cyclical and have higher credit growth compared to conventional banks. Indeed, the Profit and Loss Sharing (PLS) mechanism helps Islamic banks not to curb their credit growth during adverse economic conditions. We tested the role of the growth rate of market sentiment and found that positive market sentiment leads to higher bank credit growth. Furthermore, we investigate the impact of several bank-specific variables on bank credit growth and discuss to what extent diversification and the investment portfolio reshape the credit growth process.

Item Type: Article
Funders: University of Sharjah Competitive Research Grant [Grant No: 1703030409-P]
Uncontrolled Keywords: Credit growth; Sentiment; Islamic banks; Conventional banks; GMM; GCC
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance > Banking
Divisions: Faculty of Business and Economics > Dept of Finance and Banking
Depositing User: Ms. Juhaida Abd Rahim
Date Deposited: 28 Sep 2023 13:43
Last Modified: 28 Sep 2023 13:43

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