Mohamed Shaban
SME's lending and Islamic finance. Is it a "win-win" situation?
Shaban, Mohamed; Duygun, Meryem; Fry, John
Abstract
Information asymmetry is a common feature that hinders lending to small and medium enterprises (SMEs). In the last decade, the growth in Islamic banks lending to SMEs was overwhelming to the extent that it prompted practitioners to regard this as a “win–win” situation. Unlike a conventional bank that mainly resorts to relationship banking to SMEs, an Islamic bank uses a Murabaha contract that creates a “collateral-by-contract” to the borrower. Such distinct lending approaches by the two types of banks have an implication on banks' cost curves that arise from differences in monitoring cost. In this article, we develop a two-stage competition model to investigate the growth in SMEs lending by Islamic banks. In our theoretical model Islamic and conventional banks compete with prices at the first stage (Bertrand framework) and with loan output at the second stage (Cournot framework). Our results reveal that in price competition an Islamic bank will gain market share initially due to its differentiated product. However, in the second stage, the amount of lending to SMEs by Islamic banks decreases due to market share competition.
Citation
Shaban, M., Duygun, M., & Fry, J. (2016). SME's lending and Islamic finance. Is it a "win-win" situation?. Economic modelling, 55, 1-5. https://doi.org/10.1016/j.econmod.2016.01.029
Journal Article Type | Article |
---|---|
Acceptance Date | Jan 30, 2016 |
Online Publication Date | Feb 27, 2016 |
Publication Date | 2016-06 |
Deposit Date | Feb 4, 2022 |
Journal | Economic modelling |
Print ISSN | 0264-9993 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 55 |
Pages | 1-5 |
DOI | https://doi.org/10.1016/j.econmod.2016.01.029 |
Keywords | Islamic finance; Banking; SMEs |
Public URL | https://hull-repository.worktribe.com/output/3921023 |
Related Public URLs | https://eprints.whiterose.ac.uk/99876/ |
You might also like
Measuring competition using the Boone relative profit difference indicator
(2015)
Journal Article
Do rating grades convey important information: German evidence?
(2016)
Journal Article
Dividend policy of Indonesian listed firms: The role of families and the state
(2018)
Journal Article
Downloadable Citations
About Repository@Hull
Administrator e-mail: repository@hull.ac.uk
This application uses the following open-source libraries:
SheetJS Community Edition
Apache License Version 2.0 (http://www.apache.org/licenses/)
PDF.js
Apache License Version 2.0 (http://www.apache.org/licenses/)
Font Awesome
SIL OFL 1.1 (http://scripts.sil.org/OFL)
MIT License (http://opensource.org/licenses/mit-license.html)
CC BY 3.0 ( http://creativecommons.org/licenses/by/3.0/)
Powered by Worktribe © 2025
Advanced Search