Abstract:
Purpose – The aim of this paper has twofold: (1) to explain and compare the financial evolution of Islamic and
conventional banking sector in the Gulf Cooperative Council (GCC) countries before and during the COVID-19
pandemic and (2) to explore the key success factors that might affect Islamic and conventional banks
performance before and mainly during COVID-19 pandemic period.
Design/methodology/approach – Orbis Bank Focus database and annual financial reports are used to
collect financial information of Islamic and conventional banks in GCC countries over four years: 2017, 2018,
2019 and 2020. Descriptive statistics, T-test, multiple regression, and 2SLS and GMM models are employed to
analyze the financial structure and performance of Islamic and conventional banks before and during the
COVID-19 pandemic period.
Findings – Results of this study reveal that (1) there is a significant difference between Islamic banks and
conventional banks during the crisis of COVID-19, where the conventional banks have presented a higher level
of financial performance and financial liquidity than their Islamic counterparts, (2) conventional banks have
revealed higher capacity to manage their financial risk during the crisis period, and (3) a high level of non-
performing loan, high inflation rate and high percentage of non-important cost have a negative impact on the
financial performance of Islamic banks mainly during the pandemic period of COVID-19. However, the result
indicates that a high level of liquidity risk increased the performance of Islamic banks but this impact falls
sharply during the pandemic period.
Originality/value – This study provides information that supports investors, regulators and executive
managers in GCC countries. A well-structured balance sheet would improve the financial performance and risk
management of the banking sector in GCC countries, especially in times of crisis and pandemics.
