Did Islamic banking perform better during the financial crisis? Evidence from the UAE

This paper examines the performance (on profitability and productivity) of the main Islamic financial instruments after the recent financial crisis at two levels. Using balance sheet data for 25 national banks of the United Arab Emirates (UAE) and a compensating differential framework, the performance gap between the conventional and Islamic banking systems is assessed. Unconditional and conditional performance differences show that, unlike other Gulf Cooperation Council (GCC) countries, in the UAE, the conventional banking system is performing better than the Islamic one. However, after the crisis, Islamic banks seem to close the difference for most of these performance indicators.