Suleman Dawood School of Business (SDSB) faculty, Dr. Bushra Naqvi's article, ‘What Enables Islamic Banks to Contribute in Global Financial Reintermediation?’ has been published in the Pacific-Basin Finance Journal.
The research explores conventional banks which were once competing with non-banking financial institutions and capital markets today face the new challenge of being reintermediated by Islamic banks. Earlier academic research has been debating over disintermediation and reintermediation of conventional banks, but consistently failed to address reintermediation through Islamic banks as a possibility. This study, however, fills the void by addressing the novel possibility of reintermediation “within” the banking sector and is the first attempt to analyse and compare Islamic and conventional banks from the perspective of reintermediated financial markets.
After identifying the reintermediation trends led by Islamic banks, the research investigates several bank-specific financial and non-financial characteristics that might have enabled Islamic banks to emerge as an important player in reintermediated financial markets. By keeping her foucs on a slightly modified version of CAMELS framework where ‘S’ represents “Service Quality”, Dr. Naqvi finds that along with better capitalisation (C) and improved liquidity (L), better service quality (S) is another distinguished feature of Islamic banks that might be linked with their high degree of intermediation.