Islamic Finance

- Solution to global Economic Crisis

ISLAMIC FINANCE
Financial system based on the principals of Islamic
Law ( Shariah Law ).
Two basic principals

And their taking usury though indeed they were forbidden it and their devouring the property of people
falsely, and We have prepared for the unbelievers from among them a painful chastisement.
(Quran, An-Nisa, 4: 161)
Interest
Profit and Loss
sharing
OBJECTIVE
To study the Islamic financial institutions and
their resilience to the global economic crisis
including a comparative study of the performance
of the Islamic banks and conventional banks
during the same.

RESEARCH QUESTION
Did the Islamic banks performed better than the
conventional banks during the recent global
economic crisis of 2008?

Data sample of study
Includes Islamic and conventional banks in GCC
from 2006 to 2009.
Secondary data collected from the balance sheets
available for all banks considered.
Data sample size - 9 Conventional Banks
- 9 Islamic Banks
Variables used in study:
Profitability Variables- ROE (Return on Equity)
Capital- ROA (Return on Assets)
Liquid Assets - Liquidity




Research Methodology
Evaluates different variables before and during
the financial crisis, between Islamic and
Conventional banks and its impact on them.
Therefore, the study uses T-Test for each of the
ratios to compare before and during the financial
crisis for IB and CB separately.
Tested for each of the ratios if IB performed
better than CB before and during the crisis at 5%
level of significance.
DATA SET AND VARIABLES
10 Islamic banks and 9 conventional banks.
From year 2006 to 2009.
Variables included
ROE (Return on Equity)
ROA (Return on Assets)
Liquidity
Development of Hypothesis
Hypothesis 1: Profitability

H1- Islamic banks are more profitable than
conventional banks before and during the financial
crisis.

Hypothesis 2: Capital Structure

H2: Islamic banks have better capital structure
than conventional banks before and during the
financial crisis.
Hypothesis 3: Islamic banks have better liquidity
than conventional banks before and during
global economic crisis.

Analysis
Mean before
crisis (06-07)
Mean during
crisis (08-09)
Sig. value
ROE 23.1250 11.1250 0.005
ROA 4.8981 2.9800 0.036
Liquidity 18.8050 14.4650 0.568
Islamic Banks
Mean before
crisis (06-07)
Mean during
crisis (08-09)
Sig. value
ROE 13.5012 6.9475 0.098
ROA 2.0925 1.2494 0.409
Liquidity 26.2200 20.3769 0.661
Conventional banks
Conclusion
To study the Islamic financial institutions and
their resilience to the global economic crisis
including a comparative study of the
performance of the Islamic banks and
conventional banks during the same.

Thank You
Group 1:
Abhinav Singhal
Anureen Bhatti
Garv Vadehra
Gourav Didwania
Rameeze Khan