In this article we explain how Islamic banks (IBs) maximize profitability in the presence of costly religiosity. Because of strong competition between IBs and conventional banks (CBs), a unique equilibrium emerges that affects the IB pricing structure. We propose a new model that identifies the optimal rate on the asset and liability sides of IBs. It shows that the financial products offered by IBs are not an exogenous function of religiosity; instead, they are endogenously determined by the nature of market forces in which IBs are operating. We show that in the presence of costly religiosity and competition, the rates of both converge. Moreover, the competitive pricing mechanism induces IBs to structure their asset‐ and liability‐side financial products (particularly Murabaha) with a risk profile similar to that of the CB loan system. This article empirically supports the theoretical propositions by using data from 17 Muslim majority countries where both IBs and CBs coexist from 2000 to 2015. We find that, holding other factors of bank returns constant, competition significantly affects IB asset‐ and liability‐side returns. The analysis also reveals that because of increasing competition between IBs and CBs, the market power of IBs has significantly declined over time.

中文翻译：

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伊斯兰银行，成本高昂的服务和竞争

在本文中，我们解释了在存在高昂宗教信仰的情况下伊斯兰银行（IB）如何最大限度地提高盈利能力。由于IB与传统银行（CB）之间的激烈竞争，出现了影响IB定价结构的独特平衡。我们提出了一种新模型，该模型可以确定IB资产和负债方面的最优利率。它表明，国际文凭组织提供的金融产品不是宗教活动的外生功能。相反，它们是由IB运作所在的市场力量的性质内生决定的。我们表明，在存在高昂的宗教信仰和竞争的情况下，两者的比率都趋于一致。此外，竞争性定价机制促使IB构造其资产和负债侧的金融产品（尤其是Murabaha）的风险状况类似于可换股债券贷款系统。本文通过使用2000年至2015年IB和CB并存的17个穆斯林多数国家的数据从经验上支持理论主张。我们发现，在保持银行收益率其他因素不变的情况下，竞争会显着影响IB资产和负债方收益。分析还显示，由于IB和CB之间的竞争加剧，IB的市场力量随着时间的推移而显着下降。