The consequence of the credit risk on the fnancial performance in light of COVID-19: Evidence from Islamic versus conventional banks across MEA region
Date
2022-07
Journal Title
Journal ISSN
Volume Title
Type
Article
Publisher
Springer
Series Info
Future Business Journal;(2022) 8:21
Doi
Scientific Journal Rankings
Abstract
Purpose: The increased number of nonperforming loans (NPLs) during COVID-19 pandemic has interrogated the
robustness of banks and stability of the whole banking segment. We examine the impact of credit risk (CR) on fnan‑
cial performance (FP) by comparing Islamic banks (IBs) to conventional banks (CBs). We also investigate the infuence
of COVID-19 on this association.
Design/methodology/approach: Our sample includes the largest 200 banks across 15 countries from the Middle
East and the Africa (MEA) region over a four-year period (2018–2021). Panel ordinary least squares (OLS) with fxed and
random efects were used.
Findings: We fnd a negative association between NPLs and FP for IBs and CBs. We reveal that COVID-19 is partially
mediated the association between NPLs and FP in case of the whole sample and separated sample of CBs while not
in case of IBs.
Originality: The evidence of CR and FP on samples of fnancial sector across MEA region has not been studied in the
era of COVID-19 as far as we know.
Research limitations/implications: This study contributes to the knowledge of the risk and fnancial performance
during the crisis nexus and provides information that is valued to bankers, academics, managers and regulators for
policy formulation.
Description
Keywords
COVID-19 pandemic, Credit risk, Financial performance, Islamic, Convectional banks, MEA region