Financial intermediation and monetary transmission through conventional and Islamic channels

This thesis studies the salient features of Islamic banking and finance (IBF) in comparison to conventional banking and finance (CBF).The study explains the balance sheet products used by Islamic banks as well as analyzes the proposed tools for monetary policy in IBF. Next, the dissertation empirically tests how the structure of Islamic banks is different from that of conventional banks and whether or not Islamic banks are more stable than the conventional ones. The importance of last question has been increased especially after the financial crisis 2007-09. The dissertation also examines how the capital market instruments in IBF, called sukuk, are structured and, in case of defaults, restructured. The distress resolution mechanism in IBF is also discussed in this regard. Finally, the study provides an empirical analysis of whether the transmission of monetary policy through the so-called bank lending channel will be altered in strength when the Islamic segment of the banking sector becomes even more important