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The Degree Of Competitiveness Of Islamic Banks Compared To Commercial Banks In Kuwait

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  • Mohammad ALAWIN

Abstract

The aim of this study is to examine the competitiveness level for Islamic and commercial banks in Kuwait during the period 2010 – 2021. The methodology of the study assessed the degree of competition among nine national Kuwaiti banks using the Panzar - Rosse model, or the H-statistic approach. The study assessed how close the two kinds of banks in Kuwait are to perfect competition or toward monopoly behavior. It built a model for the revenues of the banking sector in Kuwait. The model considered various specifications that affect the banking sector’s performance like deposits, credits and the costs of the main production inputs. Using the panel data methodology of estimation, the results revealed that the market structure for the banking sector in Kuwait is far from being a monopolistic behavior. In fact, it is ranged between monopolistic competition and perfect competition. Though the banking sector in Kuwait is still in its development stages, the results provided a signal to policy makers regarding their policies. One main implication and recommendation of the study is to keep strong competition among banks which requires maintaining the stability within the banking system.

Suggested Citation

  • Mohammad ALAWIN, 2024. "The Degree Of Competitiveness Of Islamic Banks Compared To Commercial Banks In Kuwait," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 24(1), pages 121-136.
    • Handle: RePEc:eaa:aeinde:v:24:y:2024:i:1_7
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    File URL: http://www.usc.es/~economet/reviews/aeid2417.pdf
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    References listed on IDEAS

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    1. K.K. Siraj & P. Sudarsanan Pillai, 2012. "Comparative Study on Performance of Islamic Banks and Conventional Banks in GCC region," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(3), pages 1-6.
    2. Panzar, John C & Rosse, James N, 1987. "Testing for "Monopoly" Equilibrium," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 443-456, June.
    3. Zaroug Osman Bilal & Omar Mohammad Durrah & Tariq Mohamed Atiya, 2016. "Comparative Study on Performance of Islamic Banks and Conventional Banks: Evidence from Oman," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1835-1841.
    4. Turk-Ariss, Rima, 2009. "Competitive behavior in Middle East and North Africa banking systems," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 693-710, May.
    5. Olszak, Małgorzata & Świtała, Filip & Kowalska, Iwona, 2013. "Competition in commercial banks in Poland – analysis of Panzar-Rosse H-statistics," MPRA Paper 53782, University Library of Munich, Germany.
    6. Abugamea, Gaber, 2018. "Determinants of Banking Sector Profitability: Empirical Evidence from Palestine," MPRA Paper 89772, University Library of Munich, Germany, revised 2018.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. 54. Publications of the Euro-American Association in year 2024: Articles and ebook Chapters
      by MCG Blogs de Economía in Euro-American Association: World Development on 2024-04-01 18:21:00

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