Performance of Islamic Banks in the GCC during the Crisis
Masood Ahmed[1] compares and analyzes in his article: “Did Islamic Banks in the Gulf Do Better Than Conventional Ones in the Crisis?” (Oct. 14, 2009) the performance of Islamic banks in the countries of the GCC (Gulf Cooperation Council) with conventional ones during the global financial crisis. The article is based on the IMF’s latest regional economic outlook for the Middle East.
Islamic banks differ from conventional banks both in risk portfolios and risk concentrations:
- Portfolio risk: “Unlike conventional banks, however, Islamic banks are not permitted to have any direct exposure to financial derivatives or conventional financial institutions’ securities—which were hit most during the global crisis.”
- Risk concentration: “The main difference in risk exposures appears to be related to concentration risk of Islamic banks in certain countries.”
The article concludes:
“Islamic banks were less affected during the initial phase of the crisis, reflecting a stronger first-round impact on conventional banks through mark-to-market valuations on securities in 2008. But, in 2009, data for the first half of the year indicate somewhat larger declines in profitability for Islamic banks, revealing the second-round effect of the crisis on the real economy, especially real estate.”[ 2]
Download: IMF Analysis [3] (pdf-file, 72 p., 1.29 MB)
Source: iMFdirect, Did Islamic Banks in the Gulf Do Better Than Conventional Ones in the Crisis?, URL: http://blog-imfdirect.imf.org/2009/…
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- Director of the IMF’s Middle East and Central Asia Department [↩]
- Islamic banks’ exposure to the risky real estate and construction sectors is lower in Saudi Arabia, Kuwait, and Bahrain, but it is significantly higher than the system’s average in the United Arab Emirates (U.A.E.) and Qatar. [↩]
- World Economic and Financial Surveys, Regional Economic Outlook, Middle East and Central Asia, International Monetary Fund, Oct. 09. [↩]
Hartmut Buettner @ October 29, 2009
