Non-Performing Financing Risk in GCC Islamic Banks Under Global and U.S. Monetary Policy Uncertainty: Fixed-Effects and Panel Quantile Evidence

This study examines the determinants of non-performing financing (NPF) using country-level Islamic banking system aggregates for the six Gulf Cooperation Council (GCC) countries, with particular attention to the role of global economic policy uncertainty and U.S. monetary policy uncertainty. Using a panel dataset covering the period 2014Q4–2024Q3, this study applies fixed-effects estimation and panel quantile regression to capture both average effects and distributional heterogeneity in financing risk. The findings reveal that the determinants of NPF vary significantly across the conditional NPF distribution. Profitability and capital adequacy are positively associated with NPF, whereas GDP is negatively associated with NPF. Liquidity has a negative and statistically significant association mainly in the middle and upper quantiles, indicating a stronger stabilizing role under elevated risk conditions. Global economic policy uncertainty is significant only in the upper quantiles and has a negative coefficient, while U.S. monetary policy uncertainty shows limited statistical relevance. These results indicate that mean-based models may conceal important differences across financing risk regimes. The findings are interpreted as statistical associations rather than causal effects, given the country-level aggregation, limited cross-sectional dimension, and potential measurement and model specification constraints. This study contributes distribution-sensitive evidence on GCC Islamic banking systems and offers cautious implications for risk monitoring, liquidity management, and macroprudential supervision.