The Impact of Capital Structure on the Credit Policy of Islamic Banks in Syria

Abstract

Amidst the complex economic challenges facing the Syrian economy—including prolonged conflict, sanctions, and currency collapse—there is a growing need for financing models that are both flexible and effective in risk management. This study aims to analyze the impact of capital structure, represented by paid-up capital, reserves, and shareholders’ equity, on the credit policy of Syrian Islamic banks listed on the Damascus Securities Exchange, with a particular focus on Islamic credit instruments such as mudarabah and musharakah.

The research adopts a descriptive-analytical methodology and tests its hypotheses using various regression models (linear, sigmoid, cubic, compound, and power), drawing on financial data spanning the years 2014 to 2023.

Findings reveal a statistically significant effect of capital structure on credit policy, with variations in impact depending on the chosen performance indicator (deferred sale receivables or assets under investment/liquidation). The statistical models also indicate that reserves and equity play a complex role in shaping credit policy through profit distribution strategies and the retention of provisions aimed at enhancing financial stability.

The study recommends expanding the use of profit-and-loss sharing instruments, relying on long-term deposits and sukuk to finance productive projects, and promoting waqf-based mechanisms to support socio-developmental activities—positioning Islamic finance as a strategic pillar in mitigating the systemic repercussions of Syria’s economic crises.