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Towards sustainable bank bailouts

Author

Listed:
  • Sara AlBalooshi
  • Sara Alfaihani
  • Rabab Ebrahim

Abstract

This paper investigates the viability of using Islamic financing products in government bailout schemes. Empirically, we examine the association between bank sustainability and the different Islamic financing products, equity-based and debt-based. We use a multilevel model and an unbalanced panel hand-collected banking data of GCC banks over the period 2006-2016. The findings show that the Islamic equity-based financing products (profit-loss-sharing and Islamic futures-like products) significantly promote bank sustainability, while the debt-like products (Sukuk and Fixed-income) will lead to more fragile banks. These findings will be of interest to central banks and policy makers while considering bailout options for banks. The bailout funds should be regulated and directed toward Islamic equity-based financing products to maintain sustainability of the rescue funds, banking system and the general economy.

Suggested Citation

  • Sara AlBalooshi & Sara Alfaihani & Rabab Ebrahim, 2024. "Towards sustainable bank bailouts," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 28(3/4), pages 417-436.
  • Handle: RePEc:ids:ijecbr:v:28:y:2024:i:3/4:p:417-436
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