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This paper investigates the determinants of the pattern of Islamic bank diffusion around the world using country-level data for 1992 - 2006. The analysis illustrates that income per capita, share of Muslims in the population and status as an oil producer are linked to the development of Islamic banking, as are economic integration with Middle Eastern countries and proximity to Islamic financial centers. Interest rates have a negative impact on Islamic banking, reflecting the implicit benchmark for Islamic banks. The quality of institutions does not matter, probably because the often higher hurdle set by Shariah law trumps the quality of local institutions in most countries. The 9/11 attacks were not important to the diffusion of Islamic banking; but they coincided with rising oil prices, which are a significant factor in the diffusion of Islamic banking. Islamic banks also appear to be complements to, rather than substitutes for, conventional banks.

Banks and Banking --- Macroeconomics --- Islamic Banking and Finance --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Economic Development: General --- Other Economic Systems: Public Economics --- Financial Economics --- Energy: Demand and Supply --- Prices --- Interest Rates: Determination, Term Structure, and Effects --- Banking --- Finance --- Islamic banking --- Commercial banks --- Oil prices --- Islamic finance --- Financial services --- Financial institutions --- Real interest rates --- Banks and banking --- Islamic countries --- Interest rates --- Malaysia --- Religious aspects --- Islam.

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This paper examines the performance of Islamic banks (IBs) and conventional banks (CBs) during the recent global crisis by looking at the impact of the crisis on profitability, credit and asset growth, and external ratings in a group of countries where the two types of banks have significant market share. Our analysis suggests that IBs have been affected differently than CBs. Factors related to IBs‘ business model helped limit the adverse impact on profitability in 2008, while weaknesses in risk management practices in some IBs led to a larger decline in profitability in 2009 compared to CBs. IBs‘ credit and asset growth performed better than did that of CBs in 2008-09, contributing to financial and economic stability. External rating agencies‘ re-assessment of IBs‘ risk was generally more favorable.

Global Financial Crisis, 2008-2009. --- Banks and banking --- Investments --- Stockholders --- Investors --- Shareholders --- Capitalists and financiers --- Corporation law --- Corporations --- Stocks --- Global Economic Crisis, 2008-2009 --- Subprime Mortgage Crisis, 2008-2009 --- Financial crises --- Investor relations --- Banks and Banking --- Financial Risk Management --- Money and Monetary Policy --- Islamic Banking and Finance --- Financial Institutions and Services: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Other Economic Systems: Public Economics --- Financial Economics --- Financial Crises --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Banking --- Finance --- Economic & financial crises & disasters --- Monetary economics --- Islamic banking --- Islamic finance --- Credit --- Financial services --- Money --- Commercial banks --- Financial institutions --- Islamic countries --- Bahrain, Kingdom of