Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting and Transport
ISSN (Print): 2376-1326 ISSN (Online): 2376-1334 Website: Editor-in-chief: Pr. Abdelfatteh Bouri
Open Access
Journal Browser
Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting and Transport. 2013, 1(1), 1-12
DOI: 10.12691/jbe-1-1-1
Open AccessArticle

Islamic Financial Stability during the US Sub-prime Crisis: Using from Data Panel

Saïda Daly1, , Sonia Ghorbel‐Zouari2 and Mohamed Frikha1

1Applied Economics Laboratory, Faculty of Economics and Management, Sfax, Tunisia

2Higher Institute of Business Administration, Sfax, Tunisia

Pub. Date: November 16, 2013

Cite this paper:
Saïda Daly, Sonia Ghorbel‐Zouari and Mohamed Frikha. Islamic Financial Stability during the US Sub-prime Crisis: Using from Data Panel. Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting and Transport. 2013; 1(1):1-12. doi: 10.12691/jbe-1-1-1


The recent global financial crisis has induced a series of failures in many conventional banks. It has plunged the world economy into the deepest recession ever since the end of the Second World War (IMF, 2009). In fact, economic growth of around 7% in 2007 in Western Europe fell to 1% in 2009 [1]. In this case, the moral and ethical aspect of finance began to be more emphasized. This financial crisis has increased the attention on Islamic banking [2]. Indeed, Islamic Banks hold over US $700 billion in assets and are growing at over 15% p.a [3]. In the same vision, [4] the Nobel Laureate, and at the same time the President of the Commission of Experts on Reforms of the International Monetary and Financial System, stressed that the world would have been able to avoid such a crisis if they have followed the model of Islamic finance. He added for a well-functioning financial system, it must, at its core, real cash). The aims of this paper are to test the resistance of the Islamic Banks (IBs) in comparison with the Conventional ones (CBs) to the last Sub-primes crisis. The solidity of these banks is appreciated across an empirical study of a sample of IBs and CBs in 8 banking systems. This sample is characterized by an important presence of IBs. By referring to an objective study of the solidity of banks measured by the Z-score, we conclude that Small Islamic Banks (SIBs) tend to be financially stronger than Small Conventional ones (SCBs). Large Conventional Banks (LCBs) tend to be financially stronger than Large Islamic ones (LIBs). Small Islamic Banks (SIBs) have tendency to be more solid than the Large Conventional Banks (LCBs).

Islamic banks conventional banks sub-prime crisis stability

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit


Figure of 3


[1]  Khoutem, B.J. and Nedra, B.A, “Islamic participative financial intermediation and economic growth,” Journal of Islamic Economics, Banking and Finance, 8 (3). 45-59. July - Sep .2012.
[2]  Beck,T., Demirgüç-Kunt, A. and Merrouche, O, “Islamic vs Conventional Banking Business Model Efficiency and Stability,” WP Policy Research, the World Bank, 5446. 2010.
[3]  Khan, F. “How Islamic’ is Islamic Banking,” Journal of Economic & Behavior Organization, 76 (3). 805-820. 2010.
[4]  Stiglitz, J. “Finance Islamique et Conformité,” COFFIS, Séminaire n°1. 2009.
[5]  Anwar,Q. Naiem, S. and Mohamud, “A History evolution of Islamic finance,” Islamic Finance online, 1946.
[6]  Ariff, M. “Islamic Banking,” Asian-Pacific Economic Literature, 2 (2). 46-62. September. 1988.
[7]  Abdel-Haq, M.K “Islamic Development Bank: An Analytical Study”, Yarmouk University, 1989.
[8]  Haron, S. “A Comparative Study of Islamic Banking Practices,” Islamic Economic, 10 (1) 1-31. January. 2000.
[9]  Khan, T. and Hassen, A. “Risk Management: An Analysis of Issues in Islamic Financial Industry,” Occasional Paper, Islamic Research and Training Institute, 5. 2005.
[10]  Elfakhani, S., Hassan, M.K. and Sidani, Y. “Comparative Performance of Islamic Versus Secural Mutal Funds,” the 12th Economic research Forum Conference, Cairo, Egypte. 19-12. September 2005.
[11]  Sundararajan, V. and Errico, L. “Islamic Financial Institutions and products in the global financial system: Key issues in risk management and challenges ahead,” FMI, WP 192. November. 2002.
[12]  El Qorchi, M. “Islamic Finance Gears Up,” IMF, Finance and Development, 42. 2005.
[13]  Iqbal, Z. and Molyneux, P. .“Thirty Years of Islamic Banking: History, Performance and Prospects,” New York, Palgrave Macmillan. 2005.
[14]  Smolo, E. and Mirakhor, A. “the global financial crisis and its implications for the Islamic financial industry,” International Journal of Islamic and Middle Eastern Finance and Management, 3 (4). 372-385. 2010.
[15]  Bakar, N. and Rahman, A “A Comparative Study of Zakah and Modern Taxation” J.KAU: Islamic Econ, 20 (1). 25-40. 2007.
[16]  Aziz, Z.A “Talent development in Islamic finance over the next decade” BIS central bankers’ speeches, Kuala Lumpur, 14 December 2011.
[17]  Chapra, M.U “monetary management in an Islamic economy” Islamic Economic Studies, 4 (1). December 1996.
[18]  Hussein, A. “Global Financial crisis and Islamic finance,” MPRA Paper, 22167, posted. 17April.2010.
[19]  Furqani, H. and Mulyany, R. “Islamic banking and economic growth: Empirical evidence from Malaysia,” Journal of Economic Cooperation and Development, 30 (2). 59-74. 2009.
[20]  Afiga, H “Islamic Finance: Ethical Analysis of its Status Quo,” Research Center for Islamic Legislation and Ethics, Jul.2012.
[21]  Benlahmar, I “la finance Islamique est-elle un rempart à la finance conventionnelle,” Business school, INSEEC. Paris, Bordeaux. 2010.
[22]  Humayon, A.D. and John, R.P. “Lack of Profit Loss Sharing in Islamic Banking: Management and Control Imbalances,” Economic Research Paper, 00/24, Loughborough University. 2001.
[23]  Iqbal, Z. “Islamic Financial Systems,” Finance & Development, 34 (2). 42-45. 1997.
[24]  Habib, A. “The Islamic Financial System and Economic Growth: An Assessment. Macmillan,” New York. 2005.
[25]  Berkovitch, E. and Greenbaum, S, “The Loan Commitment as an Optimal Financing Contract,” Journal of Financial and Quantitative Analysis, 26 (1). 83-95. 1990.
[26]  Bhattacharya, S., Chabakauri, G. and Nyborg, K.G “Securitized banking, asymmetric information, and financial crisis: regulating systemic risk away,” Working paper series no 10. ISSN 0956-8549-704. May 2012.
[27]  Taoufiq-Johan, V. “La finance islamique est- elle un remède à la crise?,” Université Catholique de Louvain, Centre interdisciplinaire d'études de l'Islam dans le monde contemporain (CISMOC), Formation continue « Sciences religieuses – islam ». 2011/2012.
[28]  Al-Haddad, H. and Tarek el-Diwany (2008). “Boom, Bust, Crunch: Is There an Islamic Solution?” - date accessed: 28 May 2010.
[29]  Fadhlaoui, H “ Les opportunités du développement de la finance islamique et de la pensée post keynésienne pour penser la réforme du système bancaire : Etude la crise de 2007, ” Université de Bourgogne / CEMF.
[30]  How, J.C.Y, Karim, M.A. and Verhoeven, P. “Islamic Financing and Bank Risks: The case of Malaysia,” Thunderbird International Business Review, 47 (1).75-94. 2005.
[31]  Hassan, M.K “The cost, profit and X-efficiency of Islamic banks,” Egypt, the 12th ERF Annual Conference, 19–21 December, 2008.
[32]  Zachary, A. “Militant Islam in Southeast Asia Crucible of Terror,” lynne Rienner publishers ISBNs: 1-58826-212-X hc 1-58826-237-5. 2003.
[33]  Loucif, R. “Particularisme des règles de gouvernance applicables aux banques islamiques, ” RTDF N° 3 – DOCTRIN. 90-96, 2010.
[34]  Arshad, S. and Wardhan, N. “Outsourcing the Islamic way: A look into the challenges faced by financial institutions,” ISRA International journal of Islamic finance, 27th November 2012.
[35]  Pastré, O. and Gecheva, K. “La Finance Islamique à la croisée des chemins,” pastre, revue d’économie financière, 2008.
[36]  Annouar , H. and Mohamed, D “ Les habits neufs de la finance islamique ,” Master asset mangement, Paris, Février. 2007.
[37]  Sundararajan, V. “Risk Measurement, and Disclosure in Islamic Finance and the Implications of Profit Sharing Investment Accounts,” the Sixth International Conference on Islamic Economics, Banking and Finance, November 22-24, 2005.
[38]  Hassan, M. and Ahmed, M. “A comparative analysis of banker perceptions on Islamic banking,” International Journal of Business and Management, 3 (4). 157-168. April. 2008.
[39]  Mokhtar, H.,Abdullah, N. and Al-Habshi, S. “ Efficiency of Islamic banking in Malaysia: a stochastic frontier approach,” Journal of Economic Cooperation, 18 (1). 5-22. 2006.
[40]  Yudistira, D. “Efficiency in Islamic Banking: an empirical analysis of eighteen banks,” Islamic Economic Studies, 12 (1). 1-19. 2004.
[41]  Habib, Z. and Moulay, K. “Les banques islamiques et la crise financière : Une analyse empirique,” 5ème Colloque International, Finance et Stratégies de Développement. 2010.
[42]  Cihak, M. and Hesse, H. “Islamic Banks and Financial Stability: An Empirical Analysis,” IMF, WP, 3-26. 2008. Z.
[43]  Sapuan, N.M., Ramli, A.A. and Aoly, M.R. “Panel Co integration Analysis of Bank Profitability and Bank-Specific Variables in Islamic Banks,” Proceedings of 3rd Asia-Pacific Business Research Conference, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-19-1. 25-26. February 2013.
[44]  Hasan, M. and Dridi J. “The effects of the global crisis on Islamic and conventional banks: A comparative study,” WP, Monetary and Capital Markets Department & Middle East and Central Asia Department, October. 2011.
[45]  El-Hawary, D., Grais, W. and Iqbal, Z. “Diversity in the regulation of Islamic financial institutions,” The Quarterly Review of Economics and Finance, 46. 778–800. 2007.
[46]  Greuning, H.V. and Iqbal, Z. “Risk analysis for islamic banks,” J.KAU, Islamic Econ, 22 (1) 197-204. 2009.
[47]  Siddiqi, M.N. “Islamic banking and finance in theory and practice: A survey of state of the art,” Islamic Economic Studies, 13(2). February 2006.
[48]  Isik, I. and Hassan, M.K. “Efficiency, ownership and market structure, corporate control and governance in the Turkish banking industry,” Journal of Business and Financial Accounting, 30 (3). 1363-1421. October 2003.
[49]  Ben Naceur, S. and Gouaied, M, “The determinant of the Tunisian banking industry profitability: panel evidence,” 2003.
[50]  Barth, J., Nolle, D. and Rice, T, “Commercial Banking Structure, Regulation, and Performance: An International Comparison,” Economics Working Paper 97-6, Office of the Comptroller of the Currency, Washington, D.C. 1997.
[51]  Demirguç-Kunt, A. and Huizinga, H. “Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence,” The World Bank Economic Review, 13. 379-408. 1999.
[52]  La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. “Government ownership of commercial banks,” Journal of Finance, 57 (3). 265-301. 2002.
[53]  Kaufmann, D., Kraay, A. and Mastruzzi, M. “the worldwide governance Indicators: methodology and analytical Issues ,” WP, Draft Policy Research. 2010.
[54]  Boyd, J. and Runkle, D. “Size and Performance of Banking Firms,” Journal of Monetary Economies, 31 (3). 47-67. 1993.
[55]  Adams, R. and Mehran, H “ Board structure, banking firm performance and the Bank Holding ,” Company organizational form, Federal Reserve Bank of Chicago Proceedings, 408-422. May. 2003.
[56]  Berger, A. and Humphrey, D “The dominance of inefficiencies over scale and product mix economies in banking,” Journal of Monetary Economics, 28. 117-148. 1991.
[57]  Hauner, D. “Bank Efficiency and Competition in Lowincome Countries: The Case of Uganda,” WP. 05/240, International Monetary Fund, 2005.
[58]  Mohamed Ali, A., Sadrine, K. and Yousfi, O. “Activity diversification and performance of Islamic banks,” MPRA Paper 29421.posted 8. 2010.
[59]  Abedifar, P. Molyneux, Ph. and Tarazi, A “Risk and stability in Islamic banking”, Université de Limoges, France Bangor Business School, Bangor University, Wales, LL57 2DG, UK, 2011.
[60]  Paulet, E. “Universal banks and the European Banking System: Prospects and Problems,” EUI, WP, 54. 1-34. 1998.
[61]  Warde, I. “Islamic Finance in the Global Economy,” Edinburgh University Press, Edinburgh. 2000.
[62]  El-Hawary, D., Grais, W. and Iqbal, Z. “Regulating Islamic Financial Institutions: The Nature of the Regulated,” WP, World Bank 3227. 2004.
[63]  Iqbal, M., Ahmad, A. and Khan, T. “Challenges facing Islamic banking,” Islamic Development Bank, Islamic Research and Training Institute Occasional Paper #1. 1998.
[64]  Siagh, L. “Le fonctionnement des organisations dans les milieux de culture intense, le cas des banques islamiques,” Thèse présenté comme exigence partielle du doctorat en administration école des hautes études commerciales affiliée. L’université de Montréal. Septembre 2001.
[65]  Mirakhor, A. and Krichene, N. “Recent Crisis: Lessons for Islamic Finance,” the 2nd Islamic Financial Services Kuala Lumpur, Board Public Lecture. 2009.
[66]  Kennedy, P. “A Guide to Econometrics,” Blackwell Publishing, Malden, Massachusetts. 2008.
[67]  Hayat, R. and Kraeussl, R. “Risk and return characteristics of Islamic equity funds,” Emerging Markets Review, 12 (2).189-203. June.2011.
[68]  Bourkhis, K. and Nabi, M, “Islamic and conventional banks' soundness during the 2007-2008 financial crisis,” Review of Financial Economics, 22 (3). 68-77. 2012.