Banking And Financial Systems In The Arab

This book provides state-of-the art analysis of banking and financial systems in the Arab world. The early chapters present an overview of Arab economies linking banking and financial sector trends in the Arab world over the last twenty years. The rest of the work examines in detail the financial systems of the major Arab countries, focusing on banking sector and capital market developments.

Philip Molyneux is Professor in Banking and Finance, and Director of the Institute of European Finance at the University of Wales, Bangor.

Munawar Iqbal is Chief of Research in Islamic Banking and Finance at the Islamic Development Bank, Jeddah.

List of Tables

ix

List of Figures

xii

Preface

xiii

About the Authors

xv

1 Introduction

1

(7)

2 An Overview of Arabian Economies

8

(35)

Introduction

8

(1)

Economic, social and demographic trends

8

(7)

Role of the state

15

(1)

Constraints to growth

15

(1)

Economic reforms and the globalization process

16

(2)

Oil and non-oil economies - a comparison of Jordan, Egypt, Saudi Arabia and Bahrain

18

(12)

Select comparative analysis

30

(5)

Financial liberalization and intermediation processes

35

(6)

Conclusion

41

(2)

3 Economic Performance of Arabian Countries during the 1990's

43

(31)

Introduction

43

(1)

Drivers of economic growth in the Arab world

43

(1)

International trade and the liberalization process

44

(5)

Inflation trends during the 1990's

49

(1)

External indebtedness and reserves of Arab countries

49

(3)

Domestic investment and FDI in the Arab world

52

(5)

Recent economic performance in the Gulf region

57

(10)

Evidence on financial sector development in Arab economies

67

(4)

Conclusion

71

(3)

4 Banking and Financial Systems in Non-Gulf Arab Countries

74

(39)

Introduction

74

(1)

An overview of the financial systems in non-Gulf Arab countries

74

(10)

Financial system of Egypt

74

(5)

Egypt's capital market

79

(1)

Financial system of Jordan

80

(3)

Jordan's capital market

83

(1)

Comparison of Jordan and Egypt's banking system

84

(2)

Banking and finance in Maghreb countries

86

(1)

Brief history of the Maghreb financial systems

87

(6)

Algeria

87

(3)

Morocco

90

(2)

Tunisia

92

(1)

Financial liberalization in Algeria, Morocco and Tunisia

93

(5)

Structural and financial features of Maghreb banking systems

98

(13)

Banking sector structure

98

(7)

Bank ownership features

105

(2)

Balance sheet characteristics

107

(1)

Profitability

108

(2)

Financial markets

110

(1)

Other non-Gulf financial systems

111

(1)

Conclusion

111

(2)

5 Banking and Financial Systems in Gulf Cooperation Council (GCC) Countries

113

(33)

Introduction

113

(1)

Banking sector development in Saudi Arabia

114

(2)

Saudi Arabian financial markets

116

(3)

Banking in the UAE

119

(2)

UAE financial markets

121

(1)

Banking business in Bahrain

122

(2)

Bahrain's financial markets

124

(2)

Banking sector development in Kuwait

126

(2)

Kuwaiti financial markets

128

(1)

Banking in Oman

129

(3)

Omani financial markets

132

(1)

Banking sector development in Qatar

133

(3)

Qatari financial markets

136

(1)

Recent performance of GCC banking systems

136

(7)

Prospects for financial sector development

143

(1)

Conclusion

144

(2)

6 Islamic Banking

146

(28)

Introduction

146

(1)

History of Islamic banking

147

(4)

Distinguishing features of Islamic banking

151

(2)

Risk-sharing

151

(1)

Emphasis on productivity as compared to creditworthiness

151

(1)

Moral dimension

151

(1)

Wider set of products

152

(1)

Closer link between monetary and real sectors

153

(1)

Islamic banking in the Arab world

153

(4)

Islamic investment funds and insurance products

157

(4)

Regulating Islamic banks

161

(3)

Prospects for Islamic banking

164

(3)

Conclusion

167

(1)

Appendix: main Islamic banking and finance contracts

168

(6)

7 Financial System Efficiency

174

(43)

Introduction

174

(1)

Why should we be concerned about the efficiency of the financial system?

174

(2)

Defining financial system efficiency

176

(1)

Aspects of efficiency as applied to the financial system

177

(1)

Informational efficiency

177

(1)

Symmetric information efficiency

178

(3)

Fundamental efficiency - efficient stock markets

181

(1)

Operational efficiency

182

(3)

Other aspects of operational efficiency

185

(1)

Structural efficiency

186

(1)

Regulatory efficiency

187

(2)

Measuring banking sector efficiency - theory and empirical evidence

189

(1)

Importance of bank efficiency studies

190

(1)

What do banks produce? Defining the bank production process

191

(3)

Economies of scale in banking

194

(3)

Scope economies

197

(2)

X-efficiency in banking

199

(6)

Non-parametric approaches

201

(1)

Parametric approaches

202

(3)

Estimating efficient frontiers and the choice of functional forms

205

(2)

Empirical evidence on X-efficiency in banking

207

(4)

Bank X-efficiency in emerging and developing countries

211

(5)

Conclusion

216

(1)

8 Efficiency in Arab Banking

217

(39)

Introduction

217

(1)

Why study Arab bank efficiency?

217

(1)

Measuring the efficiency of Arab banks

218

(11)

Bank efficiency in Egypt, Jordan, Saudi Arabia and Bahrain

229

(5)

Efficiency in GCC banking systems

234

(5)

Scale economies in Gulf banking

239

(1)

Scale inefficiency in Gulf banking

239

(3)

Determinants of Gulf bank efficiency

242

(3)

Banking sector efficiency in Algeria, Morocco and Tunisia

245

(9)

Conclusion

254

(2)

9 Current Developments and Prospects for Arab Banks

256

(24)

Introduction

256

(1)

Trends in the structural features of Arab banking

257

(1)

Developments in retail banking

258

(2)

Private banking

260

(2)

Corporate and investment banking

262

(3)

Technological developments impacting on Arab banks

265

(2)

Regulatory trends

267

(10)

BIS core principles on effective banking supervision

267

(2)

Impact of Basel 2 on Arab banks

269

(4)

FATF's anti-money-laundering and anti-terrorist-financing recommendations

273

(4)

GCC single market and other Arab trading blocs

277

(2)

Conclusion

279

(1)

Notes

280

(7)

References

287

(15)

Index

302

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Banking And Financial Systems In The Arab World

Summary

Author Biography

Table of Contents

Supplemental Materials

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Banking And Financial Systems In The Arab World

Summary

Author Biography

Table of Contents

Supplemental Materials

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