Islamic alternatives to purely capitalist modes of finance: A study of Malaysian banks from 1999 to 2006

Like Western financial markets, Islamic modes of finance offer services characterized by profit-and-loss sharing while also providing certain debt-based instruments. Unlike traditional capitalist modes of finance, however, Islamic finance places a unique emphasis upon the former, thus prompting many comparisons between the performance of Islamic banks and conventional ones. Given the mixed results of these studies, our paper analyzes eight banks in Malaysia offering both conventional and Islamic banking operations. Our comparison is conducted via discussions of profitability, liquidity, and asset quality. It is illustrated via this micro-level analysis that Islamic modes of finance may generally equal or surpass the quantitative measures of performance describing traditional capitalist finance systems and simultaneously encourage higher levels of social equity and economic stability in the era of financialization. © 2009 Union for Radical Political Economics.