Cyclicality of bank credit growth: Conventional vs Islamic banks in the GCC
Document Type
Article
Publication Date
3-1-2022
Abstract
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.
Keywords
Credit growth, Sentiment, Islamic banks, Conventional banks, GMM, GCC
Divisions
Finance_and_Banking
Funders
University of Sharjah Competitive Research Grant [Grant No: 1703030409-P]
Publication Title
Economic Systems
Volume
46
Issue
1
Publisher
Elsevier
Publisher Location
RADARWEG 29, 1043 NX AMSTERDAM, NETHERLANDS