Islamic Banking: How Has it Diffused?

August 1, 2010

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Patrick A. Imam, and Kangni R Kpodar. Islamic Banking: How Has it Diffused?, (USA: International Monetary Fund, 2010) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper investigates the determinants of the pattern of Islamic bank diffusion around the world using country-level data for 1992 - 2006. The analysis illustrates that income per capita, share of Muslims in the population and status as an oil producer are linked to the development of Islamic banking, as are economic integration with Middle Eastern countries and proximity to Islamic financial centers. Interest rates have a negative impact on Islamic banking, reflecting the implicit benchmark for Islamic banks. The quality of institutions does not matter, probably because the often higher hurdle set by Shariah law trumps the quality of local institutions in most countries. The 9/11 attacks were not important to the diffusion of Islamic banking; but they coincided with rising oil prices, which are a significant factor in the diffusion of Islamic banking. Islamic banks also appear to be complements to, rather than substitutes for, conventional banks.

Subject: Banking, Commercial banks, Financial institutions, Financial services, Islamic banking, Islamic finance, Oil prices, Prices, Real interest rates

Keywords: Bank, Bank profit, Banking system, Commercial banks, Common law country, Conventional bank, Country, Development bank, Financial asset, Islamic banking, Islamic finance, Middle East, Oil prices, Opportunity cost, Poisson regression, Real interest rate, Real interest rates, Sub-Saharan Africa, Tobit model, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/195
Stock No:

WPIEA2010195
ISBN:

9781455205257
ISSN:

1018-5941

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