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Credit Risk and Banking Stability: A Comparative Study between Islamic and Conventional Banks

Ferhi A

This aim of this research is to evaluate the credit risk of Islamic and conventional banks and its relationship with the capital in 14 countries of the MENA region. To do this, we used a sample of 58 Islamic banks and 89 conventional banks during the 2005-2015 periods. In fact to measure the difference between Islamic banks and their conventional counterparts in terms of credit risk, the GMM is used. The results showed that the conventional model has a higher credit risk than the Islamic one. These results also showed that the larger an Islamic bank is, the higher its credit risk will be to get closer to that of conventional banks.