Recent global financial crisis have badly affected the conventional banking system everywhere in the world. Islamic banking system has also affected by the global financial crisis but performance of Islamic banks during global financial crisis is better than conventional banks. Risk in Islamic banks is less than conventional bank because of its interest free nature. Literature indicates that because of global financial crisis there is increasing demand of Islamic Financial system in Western world. This paper tests the validity of the view that Islamic banks are most stable during global financial crisis as compared to conventional banks.

Recent global financial crisis have badly affected the conventional banking system everywhere in the world. Islamic banking system has also affected by the global financial crisis but performance of Islamic banks during global financial crisis is better than conventional banks. Risk in Islamic ba...