Bank lending during the COVID-19 pandemic: A comparison of Islamic and conventional banks

ABSTRACT

Using a sample of 421 banks from 17 countries, we find that the lending growth of Islamic and conventional banks decreased during the initial phase of the COVID-19 crisis. However, the decrease is significant for conventional banks only. Credit growth for Islamic banks grew around 2.5% faster than that for conventional banks, especially in countries with a macroprudential framework in place in the year leading up to the crisis. Our evidence remains unchanged with alternative empirical methodologies, definitions of bank lending, variations in the pre-crisis period, and proxies for the severity of COVID-19 in different countries.