Journal of Applied Finance & Banking

Are Islamic Banks’ Non-bank Deposits Shock Resistant? A Comparison with Conventional Banks: Evidence from Bahrain

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• Abstract

  First, the paper empirically examines the growth of nonbank deposit liabilities (NBDL) of the Islamic banks of Bahrain during the pre-global financial crisis (PREGFC) and the global financial crisis (GFC) to determine whether the global financial crisis (GFC) has had any impact on that growth. The paper finds that the mean of nonbank deposits growth for the Islamic banks during the PREGFC and GFC was 17 percent and 30 percent, respectively. The parametric tests—t-test, Welch F-test, and ANOVA—failed to reject the null hypothesis that there was no difference in nonbank deposit growth between the PREGFC and the GFC, suggesting that the global financial crisis had no impact on the Islamic banks’ NBDL. Second, the paper compares the impact of GFC on nonbank deposit growth between Islamic banks and conventional banks. The result of the hypothesis test, mean difference, between the conventional banks and the Islamic banks during the pre GFC period showed significant difference between them, which suggest that the global financial crisis had a more negative impact on the conventional banks’ nonbank deposit growth than on that of the Islamic banks. Plausible reasons for Islamic banks’ shock resistance are explained.