Navigating crisis: marketing dynamics and resilience in the MENA’s dual-banking system amidst the SAR-COV-2 pandemic

In this paper, we investigate how market concentration and efficiency impact banks’ performance and stability during the SAR-COV-2 pandemic. There is a research gap in the empirical literature in understanding the specific impact of market concentration and efficiency on the profitability and risk-taking behavior of banks, particularly in the developing context of the Middle East and North Africa (MENA) region. To address this gap, we examine the relationship between market concentration, efficiency, and bank performance using a comprehensive dataset encompassing 575 banks across 20 MENA countries from 2006 to 2021. Specifically, we examine the market dynamics and performance of different banking systems co-existing in the MENA region. Our findings indicate that prior to the pandemic, both conventional and Islamic banks benefited from enhanced financial stability as a result of the increased market concentration and efficiency. However, during the pandemic, the positive effects of efficiency and concentration were primarily observed within the group of Islamic banks. Furthermore, we provide new evidence for the moderating effect of market concentration, with a significant negative impact suggesting that increased market competition reinforces the efficiency effect during the pandemic. Our findings are important for policymakers and regulatory authorities in the MENA region as they indicate the need for new policies that assign a more significant role to Islamic banking in the post-SAR-COV-2 recovery.