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Regulatory policies in the global Islamic banking sector in the outbreak of COVID-19 pandemic

Author

Listed:
  • Walid Mansour

    (University of Carthage
    University of Sousse)

  • Hechem Ajmi

    (International Islamic University)

  • Karima Saci

    (DAR AL-HEKMA University)

Abstract

This paper forecasts the response of Islamic banks’ dynamics (size, profitability, nonperforming financing, and stability) to the COVID-19 pandemic over the period ranging from 2019Q4 to 2021Q4. Nine jurisdictions are considered based on their Islamic banks’ systemic importance, namely Bahrain, Brunei, Indonesia, Kuwait, Malaysia, Pakistan, Saudi Arabia, Turkey, and UAE. Using the bivariate VARX model, our forecasting exercise shows that the Islamic banks’ response to the COVID-19 pandemic is not uniform across jurisdictions. While the Islamic banks’ dynamics in Saudi Arabia, UAE, and Kuwait are less likely to be impaired, Bahrain, Brunei, Malaysia, Pakistan, and Turkey are expected to be relatively more affected especially in terms of their size growth. Saudi Arabia will continue leading the growth momentum of the global Islamic banking sector, and its Islamic banks’ assets are expected to reach at least $185.4 billion by the end of the fourth quarter of 2021. This paper recommends a prioritization approach for the implementation of the policy measures by the jurisdictions based on their banks-specific responses to the COVID-19 pandemic.

Suggested Citation

  • Walid Mansour & Hechem Ajmi & Karima Saci, 2022. "Regulatory policies in the global Islamic banking sector in the outbreak of COVID-19 pandemic," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(3), pages 265-287, September.
    • Handle: RePEc:pal:jbkreg:v:23:y:2022:i:3:d:10.1057_s41261-021-00147-3
    DOI: 10.1057/s41261-021-00147-3
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    More about this item

    Keywords

    Islamic banks; COVID-19 pandemic; Forecasting; VARX;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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