Country comparative assessment of Islamic banks' financial economic situation

Abstract

Purpose: Promote a country comparative assessment of the Islamic banks economic and financial situation. Methodology: We used a descriptive and documentary analytical approach. We collected data on Islamic bank financial indicators in 21 countries and analyzed it in light of the standards recommended by the Islamic Financial Services Board (IFSB) and the Basel Committee on Banking Supervision (BCBS). The sample consisted of all countries with available data in the IFSB database (PSIFIs). Data refers to the second quarter of 2018 grouped by countries. We used a simple descriptive statistic, in figures form, to analyze the collected data. Results: This document points out that 90% of Islamic financial institutions (IFIs) in the sample calculate the capital adequacy ratio (CAR) according to BCBS recommendations. In addition, 95% have CARs above 8% (the minimum set by BCBS and IFSB). Therefore, 95% of countries have secure financial systems in terms of bank solvency. In terms of asset quality, the Islamic financial system in Oman showed the best quality in managing its resources. Sudan has shown the highest ratios of profitability in its Islamic banks. In the liquidity analysis, it was not possible to identify precisely which country has the best liquidity ratios in short and long term as more than 60% of the countries did not present sufficient data. In terms of net assets over total assets, and short-term compliance, the Islamic financial systems of Egypt and Afghanistan, respectively, led with better liquidity ratios, showing the ability and security to meet their obligations. Contributions of the Study: Identify countries with the highest / lowest risk considering IFSB and BCBS requirements and recommendations.

Keywords

• islamic finance, sharia, islamic banks, islamic financial risks.