Chapter 11: Impact of COVID-19 Pandemic on Sharia Compliance Banks – A Camel Approach Framework Applied to Saudi Banks

This study aims to investigate the impact of the COVID-19 pandemic on Islamic banks in KSA using the CAMEL approach. Based on balance sheet data, the paper analyzed ratios summarizing the financial health of all fully Sharia-compliant Saudi banks. While a limited impact was observed during 2020 related to asset quality, results demonstrated greater resilience in the aftermath of the crisis. Beyond macroeconomic support for the private sector, Islamic finance principles have proven effective in coping with this specific crisis and mitigating its negative impact. Policymakers should leverage the strengths of Islamic finance principles in their recovery and social responsibility efforts by promoting financial models that emphasize risk-sharing. Moreover, encouraging banks to maintain a commitment to ethical and socially responsible investing, which has proven beneficial in navigating the pandemic's challenges and supporting community initiatives, is essential.