Some Aspects of Liquidity In Islamic Banks (ISBs): A Case Study of Selected Banks in The MENA Region - Economic Research Forum (ERF)

Some Aspects of Liquidity In Islamic Banks (ISBs): A Case Study of Selected Banks in The MENA Region

Badr-El-Din Ibrahim and K.C. Vijaykumar

August, 2004


27 pages

G1. General Financial Markets
G2. Financial Institutions and Services

In the international scene, there is greater focus on financial stability. Various research organizations and financial institutions like the IMF, Basel Committee, European Bank and Asian Development Bank as well as researchers have compiled and attempted to measure indicators for financial soundness (See, for example, Diziobek et al 2000, Evans et al 2000; Chai and Barry 2000). In this regard, research has been conducted substantially to identify and measure them. The advent of Islamic financing institutions almost three decades ago has resulted in the appearance of new and different financial arrangements. Along with these elements, and the changes brought about in the financial and regulatory framework, could affect liquidity. Hence more research work is essential to understand and analyze the vulnerability, thereby, caused in the financial sector.

The following study is related to and covers some aspects of liquidity of some ISBs in the MENA region. The entire analysis and related issues are divided into eight sections. Following this introduction section 2 reviews liquidity-related features of ISBs and also some theoretical arguments related to liquidity risk. Section 3 provides analysis of research problem and methodology. The macroeconomic performance in the three countries that might affect the health of the ISBs are enumerates in section 4. The salient features of the structure of ISBs in Sudan, U.A.E. and Qatar are  provided in section 5. This section also investigates some qualitative (institutional and regulatory) frameworks and measures governing the financial systems in the countries selected. Banking Regulations and their Supervision along with Monetary Policy have been highlighted in the next section. In section 7 the study will then go on to analyze liquidity-related issues of selected ISBs in the MENA region. The section calculates some relevant indicators derived from data of individual banks’ balance sheets in selected countries and banks in the MENA region over the period 1990-2002. Conclusion and policy recommendations are provided in section 8 and thereafter References.

Badr-El-Din Ibrahim

K.C. Vijaykumar



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