Banking and Financial Systems in the Arab World (Palgrave Macmillan Studies in Banking and Financial Institutions)

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. Cover......Page 1 Contents......Page 6 List of Tables......Page 10 List of Figures......Page 13 Preface......Page 14 About the Authors......Page 16 1 Introduction......Page 18 Economic, social and demographic trends......Page 25 Constraints to growth......Page 32 Economic reforms and the globalization process......Page 33 Oil and non-oil economies – a comparison of Jordan, Egypt, Saudi Arabia and Bahrain......Page 35 Select comparative analysis......Page 47 Financial liberalization and intermediation processes......Page 52 Conclusion......Page 58 Drivers of economic growth in the Arab world......Page 60 International trade and the liberalization process......Page 61 External indebtedness and reserves of Arab countries......Page 66 Domestic investment and FDI in the Arab world......Page 69 Recent economic performance in the Gulf region......Page 74 Evidence on financial sector development in Arab economies......Page 84 Conclusion......Page 88 Financial system of Egypt......Page 91 Egypt's capital market......Page 96 Financial system of Jordan......Page 97 Jordan's capital market......Page 100 Comparison of Jordan and Egypt's banking system......Page 101 Banking and finance in Maghreb countries......Page 103 Algeria......Page 104 Morocco......Page 107 Tunisia......Page 109 Financial liberalization in Algeria, Morocco and Tunisia......Page 110 Banking sector structure......Page 115 Bank ownership features......Page 122 Balance sheet characteristics......Page 124 Profitability......Page 125 Financial markets......Page 127 Conclusion......Page 128 Introduction......Page 130 Banking sector development in Saudi Arabia......Page 131 Saudi Arabian financial markets......Page 133 Banking in the UAE......Page 136 UAE financial markets......Page 138 Banking business in Bahrain......Page 139 Bahrain's financial markets......Page 141 Banking sector development in Kuwait......Page 143 Kuwaiti financial markets......Page 145 Banking in Oman......Page 146 Omani financial markets......Page 149 Banking sector development in Qatar......Page 150 Recent performance of GCC banking systems......Page 153 Prospects for financial sector development......Page 160 Conclusion......Page 161 Introduction......Page 163 History of Islamic banking......Page 164 Moral dimension......Page 168 Wider set of products......Page 169 Islamic banking in the Arab world......Page 170 Islamic investment funds and insurance products......Page 174 Regulating Islamic banks......Page 178 Prospects for Islamic banking......Page 181 Conclusion......Page 184 Appendix: main Islamic banking and finance contracts......Page 185 Why should we be concerned about the efficiency of the financial system?......Page 191 Defining financial system efficiency......Page 193 Informational efficiency......Page 194 Symmetric information efficiency......Page 195 Fundamental efficiency – efficient stock markets......Page 198 Operational efficiency......Page 199 Other aspects of operational efficiency......Page 202 Structural efficiency......Page 203 Regulatory efficiency......Page 204 Measuring banking sector efficiency – theory and empirical evidence......Page 206 Importance of bank efficiency studies......Page 207 What do banks produce? Defining the bank production process......Page 208 Economies of scale in banking......Page 211 Scope economies......Page 214 X-efficiency in banking......Page 216 Non-parametric approaches......Page 218 Parametric approaches......Page 219 Estimating efficient frontiers and the choice of functional forms......Page 222 Empirical evidence on X-efficiency in banking......Page 224 Bank X-efficiency in emerging and developing countries......Page 228 Conclusion......Page 233 Why study Arab bank efficiency?......Page 234 Measuring the efficiency of Arab banks......Page 235 Bank efficiency in Egypt, Jordan, Saudi Arabia and Bahrain......Page 246 Efficiency in GCC banking systems......Page 251 Scale inefficiency in Gulf banking......Page 256 Determinants of Gulf bank efficiency......Page 259 Banking sector efficiency in Algeria, Morocco and Tunisia......Page 262 Conclusion......Page 271 Introduction......Page 273 Trends in the structural features of Arab banking......Page 274 Developments in retail banking......Page 275 Private banking......Page 277 Corporate and investment banking......Page 279 Technological developments impacting on Arab banks......Page 282 BIS core principles on effective banking supervision......Page 284 Impact of Basel 2 on Arab banks......Page 286 FATF's anti-money-laundering and anti-terrorist-financing recommendations......Page 290 GCC single market and other Arab trading blocs......Page 294 Conclusion......Page 296 Notes......Page 297 References......Page 304 A......Page 319 B......Page 322 C......Page 327 D......Page 330 E......Page 331 F......Page 333 G......Page 335 H......Page 336 I......Page 337 J......Page 339 L......Page 340 M......Page 341 O......Page 344 P......Page 345 Q......Page 346 R......Page 347 S......Page 348 T......Page 351 W......Page 352 Z......Page 353 Cover 1 Contents 6 List of Tables 10 List of Figures 13 Preface 14 About the Authors 16 1 Introduction 18 2 An Overview of Arabian Economies 25 Introduction 25 Economic, social and demographic trends 25 Role of the state 32 Constraints to growth 32 Economic reforms and the globalization process 33 Oil and non-oil economies – a comparison of Jordan, Egypt, Saudi Arabia and Bahrain 35 Select comparative analysis 47 Financial liberalization and intermediation processes 52 Conclusion 58 3 Economic Performance of Arabian Countries during the 1990s 60 Introduction 60 Drivers of economic growth in the Arab world 60 International trade and the liberalization process 61 Inflation trends during the 1990s 66 External indebtedness and reserves of Arab countries 66 Domestic investment and FDI in the Arab world 69 Recent economic performance in the Gulf region 74 Evidence on financial sector development in Arab economies 84 Conclusion 88 4 Banking and Financial Systems in Non-Gulf Arab Countries 91 Introduction 91 An overview of the financial systems in non-Gulf Arab countries 91 Financial system of Egypt 91 Egypt's capital market 96 Financial system of Jordan 97 Jordan's capital market 100 Comparison of Jordan and Egypt's banking system 101 Banking and finance in Maghreb countries 103 Brief history of the Maghreb financial systems 104 Algeria 104 Morocco 107 Tunisia 109 Financial liberalization in Algeria, Morocco and Tunisia 110 Structural and financial features of Maghreb banking systems 115 Banking sector structure 115 Bank ownership features 122 Balance sheet characteristics 124 Profitability 125 Financial markets 127 Other non-Gulf financial systems 128 Conclusion 128 5 Banking and Financial Systems in Gulf Cooperation Council (GCC) Countries 130 Introduction 130 Banking sector development in Saudi Arabia 131 Saudi Arabian financial markets 133 Banking in the UAE 136 UAE financial markets 138 Banking business in Bahrain 139 Bahrain's financial markets 141 Banking sector development in Kuwait 143 Kuwaiti financial markets 145 Banking in Oman 146 Omani financial markets 149 Banking sector development in Qatar 150 Qatari financial markets 153 Recent performance of GCC banking systems 153 Prospects for financial sector development 160 Conclusion 161 6 Islamic Banking 163 Introduction 163 History of Islamic banking 164 Distinguishing features of Islamic banking 168 Risk-sharing 168 Emphasis on productivity as compared to creditworthiness 168 Moral dimension 168 Wider set of products 169 Closer link between monetary and real sectors 170 Islamic banking in the Arab world 170 Islamic investment funds and insurance products 174 Regulating Islamic banks 178 Prospects for Islamic banking 181 Conclusion 184 Appendix: main Islamic banking and finance contracts 185 7 Financial System Efficiency 191 Introduction 191 Why should we be concerned about the efficiency of the financial system? 191 Defining financial system efficiency 193 Aspects of efficiency as applied to the financial system 194 Informational efficiency 194 Symmetric information efficiency 195 Fundamental efficiency – efficient stock markets 198 Operational efficiency 199 Other aspects of operational efficiency 202 Structural efficiency 203 Regulatory efficiency 204 Measuring banking sector efficiency – theory and empirical evidence 206 Importance of bank efficiency studies 207 What do banks produce? Defining the bank production process 208 Economies of scale in banking 211 Scope economies 214 X-efficiency in banking 216 Non-parametric approaches 218 Parametric approaches 219 Estimating efficient frontiers and the choice of functional forms 222 Empirical evidence on X-efficiency in banking 224 Bank X-efficiency in emerging and developing countries 228 Conclusion 233 8 Efficiency in Arab Banking 234 Introduction 234 Why study Arab bank efficiency? 234 Measuring the efficiency of Arab banks 235 Bank efficiency in Egypt, Jordan, Saudi Arabia and Bahrain 246 Efficiency in GCC banking systems 251 Scale economies in Gulf banking 256 Scale inefficiency in Gulf banking 256 Determinants of Gulf bank efficiency 259 Banking sector efficiency in Algeria, Morocco and Tunisia 262 Conclusion 271 9 Current Developments and Prospects for Arab Banks 273 Introduction 273 Trends in the structural features of Arab banking 274 Developments in retail banking 275 Private banking 277 Corporate and investment banking 279 Technological developments impacting on Arab banks 282 Regulatory trends 284 BIS core principles on effective banking supervision 284 Impact of Basel 2 on Arab banks 286 FATF's anti-money-laundering and anti-terrorist-financing recommendations 290 GCC single market and other Arab trading blocs 294 Conclusion 296 Notes 297 References 304 Index 319 A 319 B 322 C 327 D 330 E 331 F 333 G 335 H 336 I 337 J 339 K 340 L 340 M 341 N 344 O 344 P 345 Q 346 R 347 S 348 T 351 U 352 V 352 W 352 X 353 Y 353 Z 353 This Book Provides State-of-the Art Analysis Of Banking And Financial Systems In The Arab World. The Early Chapters Of The Text Present An Overview Of Arab Economies Linking Banking And Financial Sector Trends In The Arab World Over The Last Twenty Years. Cover; Contents; List Of Tables; List Of Figures; Preface; About The Authors; 1 Introduction; 2 An Overview Of Arabian Economies; 3 Economic Performance Of Arabian Countries During The 1990s; 4 Banking And Financial Systems In Non-gulf Arab Countries; 5 Banking And Financial Systems In Gulf Cooperation Council (gcc) Countries; 6 Islamic Banking; 7 Financial System Efficiency; 8 Efficiency In Arab Banking; 9 Current Developments And Prospects For Arab Banks; Notes; References; Index. Philip Molyneux And Munawar Iqbal. Includes Bibliographical References (p. 280-301) And Index. This book provides state-of-the art analysis of banking and financial systems in the Arab world. The early chapters of the text 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 text examines in detail the financial systems of the major Arab countries, focusing on banking sector and capital market developments. This text will be the first to provide a rigorous analytical evaluation of banking sector developments in the Arab world.