Merrouche, OuardaBeck, ThorstenDemirgüç-Kunt, Asli2012-03-192012-03-192010-10-01https://hdl.handle.net/10986/3929This paper discusses Islamic banking products and interprets them in the context of financial intermediation theory. Anecdotal evidence shows that many of the conventional products can be redrafted as Sharia-compliant products, so that the differences are smaller than expected. Comparing conventional and Islamic banks and controlling for other bank and country characteristics, the authors find few significant differences in business orientation, efficiency, asset quality, or stability. While Islamic banks seem more cost-effective than conventional banks in a broad cross-country sample, this finding reverses in a sample of countries with both Islamic and conventional banks. However, conventional banks that operate in countries with a higher market share of Islamic banks are more cost-effective but less stable. There is also consistent evidence of higher capitalization of Islamic banks and this capital cushion plus higher liquidity reserves explains the relatively better performance of Islamic banks during the recent crisis.CC BY 3.0 IGOACCOUNTINGADVERSE SELECTIONAGENCY PROBLEMSAGENCY RELATIONSHIPSAMOUNT OF CAPITALASSET QUALITYASSET RATIOASSET RATIOSASSETS RATIOASSETS RATIOSBALANCE SHEETBALANCE SHEETSBANK ACTIVITIESBANK ACTIVITYBANK CREDITBANK HOLDINGBANK HOLDING COMPANYBANK INDONESIABANK INSOLVENCYBANK REGULATIONBANK RUNSBANKING FEEBANKING ASSETSBANKING ASSOCIATIONSBANKING MARKETBANKING SECTORBANKING SECTOR ASSETSBANKING SYSTEMBANKING SYSTEMSBANKSBORROWERCAPITAL REGULATIONCAPITALIZATIONCASE OF DEFAULTCERTIFICATES OF DEPOSITCHECKSCOMPETITIVE MARKETSCONTAGIONCONVENTIONAL BANKCONVENTIONAL BANKINGCONVENTIONAL BANKSCOST-EFFICIENCYCOUNTRY COMPARISONSDEBTDEBT CONTRACTDEBT CONTRACTSDEGREE OF RISKDEMAND DEPOSITSDEPENDENTDEPOSITDEPOSIT INSURANCEDEPOSITORDEPOSITORSDEPOSITSDERIVATIVEDERIVATIVE PRODUCTSEARNING ASSETSEARNINGSECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMICSENTREPRENEURENTREPRENEURSEQUITY CAPITALEQUITY PARTICIPATIONFEE INCOMEFINANCIAL CRISISFINANCIAL DEVELOPMENTFINANCIAL FRAGILITYFINANCIAL INFORMATIONFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIARYFINANCIAL INTERMEDIATIONFINANCIAL INTERMEDIATION THEORYFINANCIAL MARKETFINANCIAL PRODUCTSFINANCIAL RISKFINANCIAL SERVICEFINANCIAL SERVICESFINANCIAL SHOCKSFINANCIAL STABILITYFINANCIAL STATEMENTFINANCIAL STATEMENTSFINANCIAL SYSTEMFINANCIAL SYSTEMSFINANCIAL TRANSACTIONSFIXED ASSETFIXED ASSETSFIXED RATEFOREIGN BANKFOREIGN BANKSFOREIGN OWNERSHIPGOVERNMENT INTERVENTIONSGOVERNMENT INVOLVEMENTGOVERNMENT OWNERSHIPGROSS REVENUESHOLDINGSHOST COUNTRYINCOME STATEMENTINCOME STATEMENTSINFORMATION ASYMMETRIESINSOLVENCY RISKINSOLVENTINSTRUMENTINTEREST PAYMENTINTEREST PAYMENTSINTEREST RATEINTEREST RATE PAYMENTSINTEREST RATE RISKINTERNATIONAL BANKINTERNATIONAL BANKSINVESTMENT BANKINVESTMENT DECISIONSINVESTMENT PURPOSESISLAMIC BANKISLAMIC BANKINGISLAMIC BANKSISLAMIC FINANCEISLAMIC MARKETISLAMIC SCHOLARSLEGAL FRAMEWORKLEGAL SYSTEMLENDERLEVERAGELIABILITYLIMITED LIABILITYLIQUID ASSETSLIQUIDITYLIQUIDITY CREATIONLIQUIDITY RATIOLIQUIDITY RISKLOANLOAN CONTRACTSLOAN LOSSLOAN LOSS PROVISIONSLOAN LOSSESLOAN-TO-DEPOSIT RATIOLONG-TERM LOANSMACROECONOMIC VARIABLESMARKET DISCIPLINEMARKET SHAREMARKET SHARESMARKET STRUCTUREMATURITYMATURITY MATCHINGMATURITY MISMATCHMEASURES OF PROFITABILITYMERGERSMICROFINANCEMONETARY FUNDMONEY LENDINGMORAL HAZARDNET INTEREST MARGINNON-PERFORMING LOANSNONPERFORMING LOANSNUMBER OF BANKSOPERATING COSTSOPERATING INCOMEOPERATING LEASESOPERATIONAL RISKOPPORTUNITY COSTSOPTIMAL CONTRACTSOUTREACHOVERHEAD COSTOVERHEAD COSTSOWNERSHIP STRUCTUREPOLITICAL ECONOMYPRIVATE CREDITPROBABILITY OF INSOLVENCYPROFIT MARGINPROMISSORY NOTESPRUDENTIAL REGULATIONSPUBLIC POLICYREAL ESTATERECOVERY PERIODRESERVESRETURNRETURN ON ASSETSRETURN ON EQUITYRETURNSRIBARISK MANAGEMENTRISK MANAGEMENT TOOLRISK SHARINGRISK TAKINGRISK-SHARING ARRANGEMENTSSAVINGSSAVINGS DEPOSITSSECURITIESSTOCK MARKETSTOCK RETURNSTOCK RETURNSSTOCKSSUBSIDIARIESSUPERVISORY AUTHORITIESSUPERVISORY FRAMEWORKSUPERVISORY POWERSUPERVISORY POWERSTRADINGTRADITIONAL LOANTRANSACTIONTRANSACTION COSTSWHOLESALE FUNDINGWITHDRAWALWorld Bankhttps://doi.org/10.1596/1813-9450-5446