Comparative Analysis of Islamic and Conventional Banking In Promoting Economic Stability

Jamiu Adeniyi Yusuf; Ibrahim Ayodele Yusuf; Azeem Tunde Muhammed; Ayuba Aderole Ismail

doi:10.28918/nnvbkj69

Authors

Jamiu Adeniyi Yusuf National Institute for Legislative and Democratic Studies
Ibrahim Ayodele Yusuf National Institute for Legislative and Democratic Studies
Azeem Tunde Muhammed Lagos State University
Ayuba Aderole Ismail Federal University Lokoja

DOI:

https://doi.org/10.28918/nnvbkj69

Abstract

This study aims to comparatively analyze Islamic and conventional banking systems in promoting economic stability by examining their operational principles, risk management practices, and financial performance. Using a comparative empirical approach with data from selected banks across various jurisdictions, the research evaluates financial stability indicators such as capital adequacy ratios, non-performing loans (NPLs), and crisis-period performance. The findings reveal that Islamic banking demonstrates stronger resilience during economic downturns due to its risk-sharing mechanisms and the prohibition of speculative transactions and interest-based activities, while conventional banking maintains advantages in market reach and liquidity structures. The study also identifies challenges faced by Islamic banks, including regulatory constraints and limited market penetration. The novelty of this research lies in its integrated comparative assessment of both banking systems within the context of macroeconomic resilience, highlighting how Islamic finance principles can contribute to a more sustainable and shock-resistant financial ecosystem.

Keywords:

Islamic Banking, Conventional Banking, Economic Stabillity, Risk Mangement, Financial Resillience

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