An Empirical Analysis of Banking Stability in Islamic and Conventional Banking Systems

This study analyzes banking stability in Islamic banking and conventional banking empirically and answers the question of whether countries with higher penetration coefficient in Islamic banking have experienced greater banking stability than other countries? Many Researchs have offered a number of legal and economic reasons for the superiority of Islamic banking over conventional banking, but this claim has never been empirically tested. Therefore, this study has used data from 7 countries with the highest level of Islamic banking level and 8 countries with conventional banking for the years 2008 to 2018, in the form of a regression model of the panel data family, to test the hypothesis of direct relationship between Islamic banking penetration and banking stability. The results obtained from the analysis of research data indicate that the establishment of Islamic banking and increasing the penetration of Islamic banking has a positive and significant effect on banking stability and therefore countries with Islamic banking experience more banking stability than countries with conventional banking.