Title: Market structure and concentration in Islamic and conventional banking

Authors: Amira Hakim; Ali Chkir

Addresses: Faculty of Economics and Management of Sfax, University of Sfax, Sfax 3018, Tunisia ' Faculty of Economics and Management of Sfax, University of Sfax, Sfax 3018, Tunisia

Abstract: This paper investigates the market structure and the degree of concentration of Islamic banking industry. This paper reports an empirical assessment of competitive conditions among the Arab GCC banking industry during the years of 2005-2010. We opt for the methodology as proposed by Panzar and Rosse based on a non-structural estimation of the H-statistic and the most frequently applied measures of concentration k-bank concentration ratio (CRk), Herfindahl-Hirschman Index (HHI), and the measure of entropy. The results show that the conventional banking industry is more concentrated than the Islamic banking industry. However, the measure of entropy confirms that the market structure of Islamic and conventional banking is almost similar with reference to total deposits and totals loans. The empirical evidence reveals that the banking industry in general and the conventional banking industry in the region operate under perfect competition; the prevailing market structure in Islamic banking industry is mostly monopoly.

Keywords: Islamic banking; bank concentration; market structure; GCC countries; Panzar-Rosse approach; conventional banking; Gulf Cooperation Council; Islamic finance; total deposits; totals loans; competition; monopoly.

DOI: 10.1504/IJFSM.2014.065576

International Journal of Financial Services Management, 2014 Vol.7 No.3/4, pp.246 - 267

Received: 11 Dec 2013
Accepted: 11 Jun 2014

Published online: 29 Oct 2014 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article