Islamic Banks’ Income Structure and Risk: Evidence from GCC Countries

Abstract

The aim of this paper is to investigate the relationship between banks risk and Islamic financial products diversification for Islamic banks in Gulf Cooperation Councils’ Countries. Based on a sample of Islamic banks in GCC countries observed for the period 2002-2008, our research makes evidence that Islamic banks expanding into Profit-Loss-Sharing products present higher risk and higher insolvency risk than banks that invest less in this kind of arrangement. Whereas, no effect is found between the Non Profit-Loss-Sharing product’s net income and risk levels.