Islamic vs Conventional banks: what differences ? Tunisian case

NEIFAR, Malika and Gharbi, Leila (2020): Islamic vs Conventional banks: what differences ? Tunisian case.

Abstract

The aim of the paper is to determine whether Tunisian Islamic and conventional banks are distinguishable from one another [on the basis of financial characteristics, in particular, profitability, liquidity, credit, insolvency risks] during 2005-2014 for a sample contains 16 banks (14 conventional and 2 Islamic).The comparison analysis between interest-free banks (IBs) and conventional banks (CBs) of bank specific factors reveals that there are differences between Islamic and conventional banks behaviour. Regression based Comparison analysis show that Interest-free banks are more profitable, more capitalized, more liquid and more stable but more riskier and less solvent than CBs. Large IBs are more profitable, more capitalized and riskier than small IBs. Small IBs have also lower Z-score than Large IBs. We conclude that the stability of IBs is attributed to size effect (Large IBs). Moreover, the stability of large IBs is driven by higher capitalization and liquidity. Across Tunisian banks, Zitouna bank is more stable while AL Baraka bank is riskier and more solvent. We find also that post Tunisian Revolution, there is no significant difference in terms of stability between IBs and CBs. However over the study period, IBs have lower insolvency risk and tend to be more capitalized and stable than CBs.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial stability, Profitability, Liquidity, Credit and Insolvency risk, GFC 2008, TUN 2011, Size, Market share, Tunisia, interest-free banking.
• Subjects: G - Financial Economics > G0 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z12 - Religion

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