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Islamic Banking: How Has it Diffused?

Author/Editor: Imam, Patrick A. | Kpodar, Kangni
Authorized for Distribution: August 1, 2010
Electronic Access: Free Full Text (PDF file size is 1,379KB)
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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.
 
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Series: Working Paper No. 10/195
Subject(s): Banking systems | Cross country analysis | Economic models | Financial systems | Interest rates | International banking | Islamic banking | Middle East | North Africa | South Asia | Sub-Saharan Africa | Time series
Author's keyword(s): Islamic banking | Middle East | Poisson regression | Tobit model
 
English  
    Published:   August 1, 2010        
            Format:   Paper
    Stock No:   WPIEA2010195   Pages:   29
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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