Holy bonds: are Islamic banks better at times of panic?

The International Monetary Fund, the world’s lender of last resort, has recently released a report on the effect of financial panics on Islamic banks. The working paper, published in February 2015 by Moazzam Farooq and Sajjad Zaheer, is based in Pakistan. In terms of methodology, the IMF paper examines the impact of a financial panic on the deposit and lending behavior of both Islamic and conventional banks in the country. Preliminary results by the report indicate that Islamic banking branches are less likely to experience a run on deposits compared to their conventional counterparts. The explanatory variables that illustrate why this is the case, however, are not so clearly defined.