A Comparative Analysis of Islamic and Commercial Banks in the MENA Region: Stability and Response during the COVID-19 Crisis

Abstract

This study investigates the resilience and performance of Islamic banks compared to commercial banks in the MENA region during the COVID-19 pandemic. Utilising panel data from 10 MENA countries from 2018 to 2022, the research employs regression analysis to discern the determinants influencing these banks' Return on Assets (ROA) and Return on Equity (ROE). The findings underscore the superior resilience of Islamic banks, particularly in terms of ROA, during this challenging period. Critical determinants of Islamic banks' profitability, such as credit risk, cost-to-income ratio, and liquidity, emerged as pivotal in shaping the performance of Islamic banks during the pandemic. The study reveals that Islamic banks' adherence to Shariah principles, especially risk-sharing, and their unique approach to credit management have been instrumental in navigating the challenges of the pandemic. The research contributes to the growing literature on Islamic banking resilience, offering valuable insights for policymakers, banking professionals, and academics.