Islamic finance: a new ethic? A comparison with conventional finance.

Summary The first chapter presents Islamic finance, its principles, products and institutions. The second chapter presents a comparison between the two banking systems, Islamic and conventional, based on a study of banking ratios and a principal component analysis. The third chapter aims at clarifying the different factors attracting customers to Islamic banks and shows that they are not limited to religious criteria to make their choice. The fourth chapter analyzes the intermediation margins of Islamic and conventional banks, using a dynamic panel approach (Arellano-Bond, 1991). It concludes that Islamic banks are characterized by higher margins. The fifth chapter examines, for both banking systems, the impact of regulatory pressure. It finds that both Islamic and conventional banks operating in the MENA region are characterized by capital levels already well above the regulatory minimum, and that regulatory pressure therefore has no impact on Islamic banks. This ineffectiveness of prudential regulation can be explained by the unsuitability of this regulation to the nature of the risk of these banks. Finally, the sixth and last chapter studies the relationship between capital and default risk. It finds that, in the MENA region, the probability of default is higher for Islamic banks.