Performance of islamic vs conventional banks in OIC countries: Resilience and recovery during Covid-19

Abstract

This paper compares the performance of Islamic and conventional banks before and during Covid-19. It uses daily data for the years 2016–2022 of 12 Islamic and 21 conventional banks in six OIC countries: Pakistan, Bangladesh, Indonesia, Malaysia, United Arab Emirates, and Turkey. The paper employs the asymmetric GJR-GARCH and E-GARCH models to estimate volatility and Chow break point test to identify structural breaks. The maximum drawdown, compound annual return, and Calmar ratios methods quantify the reaction, resilience, and recovery of both types of banks. It is observed that prior to Covid-19, Islamic banks did well because they had lower drawdowns and better Calmar ratios compared to conventional banks. During Covid-19, conventional banks did better than their counterparts, took less time to recover and had better Calmar ratios.

Keywords

• G15
• G21
• G28
• G41