The impact of COVID-19 on Islamic banks in Bangladesh: a perspective of Marxian “circuit of merchant’s capital”

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohammad Dulal Miah ◽  
Yasushi Suzuki ◽  
S. M. Sohrab Uddin
Keyword(s):  
Financial Services ◽  
Balance Sheet ◽  
Banking System ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Working Capital ◽  
Content Type ◽  
Increased Risk ◽  
Merchant Capital ◽  
The Impact

Purpose This paper aims to assess the probable impact of COVID-19 on the Islamic banking system in Bangladesh. More specifically, it attempts to test the hypothesis that Islamic banks are exposed to increased risk because of their role as a provider of “merchant capital” including financing for trade, commerce and working capital, which are believed to be severely disrupted by the COVID-19. Design/methodology/approach The paper draws upon the Marxian tradition on the identification of the circuit of “merchant capital” separated from the circuit of “interest-bearing capital.” Moreover, the research adopts the balance sheet approach to trace the sectoral distribution of investment as well as sources of income of Islamic banks. Findings The research supports the hypothesis that the investment pattern of Islamic banks is skewed toward the trade and merchant’s financing. More than two-third of Islamic banks’ investment, and income thereof, is concentrated on working capital and trade finance. As these sectors are largely vulnerable to the economic shock resulting from COVID-19, Islamic banks in Bangladesh are likely to be affected through this channel. Research limitations/implications The research focuses only on Islamic banks in Bangladesh. Further study can assess the impact of COVID-19 on conventional and Islamic banks in other countries to find similarities and differences with the findings of the current research. Practical implications The finding of this research will be useful for bank managers, policymakers and users of financial services. In particular, this study provides important information useful for regulators in devising appropriate policies which aim to mitigate the adverse impact of COVID-19. Originality/value To the best of the authors’ knowledge, this is the first study that attempts to examine the impact of COVID-19 on Islamic banking system in Bangladesh, a country where Islamic banks occupy one-third of the total banking system’s assets.

Empirical evaluation of structure-conduct-performance paradigm as applied to the Iranian Islamic banking system

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahdi Ghaemi Asl ◽  
Muhammad Mahdi Rashidi ◽  
Alireza Ghorbani
Keyword(s):  
Market Structure ◽  
Market Share ◽  
Balance Sheet ◽  
Empirical Evaluation ◽  
Banking System ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Simple Regression Model ◽  
The Impact

Purpose This paper aims to investigate the impact of market structure and market share on the performance of the Islamic banks operating in the Iranian banking system based on the structure-conduct-performance (SCP) paradigm. Design/methodology/approach The Iranian Islamic banking system’s market structure is evaluated by using the econometrics method to test the validity of the traditional SCP paradigm. For this purpose, the authors estimate a simple regression model that is consisted of several independent variables, such as the market share, bank size, real gross domestic product, liquidity and Herfindahl-Hirschman index as a proxy variable for concentration and one dependent variable, namely, the profit as a proxy for performance. The panel data includes a data sample of 22 Islamic banks operating from 2006 to 2019. Data are extracted from the balance sheet of Islamic banks and the time-series database of the Central Bank of Iran and World Bank. Findings The study’s findings indicate that both concentration and market share have a positive impact on the performance of banks in the Iranian Islamic banking system. This result is contradicted with both traditional SCP and efficient structure hypotheses; however, it confirms the existence of oligopoly or cartel in the Iranian Islamic banking system that few banks try to gain the highest share of profit and maintain their market share by colluding with each other. This result is in contradiction with other research studies about the market structure in the Iranian banking system that claimed that banks in Iran operate under monopolistic competition. In addition, it shows that the privatization of some banks in Iran does not improve and help competition in the Iranian banking system. Originality/value This paper is a pioneer empirical study analyzing the market structure, concentration and collusion based on the SCP paradigm in Iranian Islamic banking. The results of the study support the existence of collusive behavior among the Islamic bank in Iran that is not aligned with Sharia. This study clearly shows the difference between ideal Islamic banking and Islamic banking in practice in Islamic countries. This clearly indicates that only prohibiting some operations like receiving interest, gambling and bearing excessive risk is not enough. In fact, the Islamic banking system should be based on the Sharia rule in all aspects and much more modification and study have to be done to achieve an appropriate Islamic banking system. These possible modifications to overcome the issues of cartel-like market structure and collusive behavior in the Iranian Islamic banking system include making the Iranian banking system more transparent, letting foreign banks enter the Iranian banking system and minimizing the government intervention in the Iranian banking system.

Maturity transformation risk factors in Islamic banking

2018 ◽  
Vol 44 (6) ◽  
pp. 787-808
Author(s):  
Haroon Mahmood ◽  
Christopher Gan ◽  
Cuong Nguyen
Keyword(s):  
Financial Services ◽  
Global Financial Crisis ◽  
Generalized Method Of Moments ◽  
Balance Sheet ◽  
Islamic Banking ◽  
Annual Data ◽  
Basel Iii ◽  
Islamic Banks ◽  
Data Set ◽  
Content Type

Purpose Maturity transformation risk is one of the leading causes of the global financial crisis. While endorsing the new Basel III liquidity reforms, the Islamic Financial Services Board has suggested a modified NSFR ratio as a structural measure for the maturity transformation function of Islamic banks, allowing for their unique balance sheet structure. The purpose of this paper is to analyze various firm-specific and macroeconomic factors that may significantly affect the maturity transformation risk of these banks. Design/methodology/approach Using an annual data set of 55 full-fledged Islamic banks from 11 different countries over a period from 2006-2015, this study utilizes a two-step system generalized method of moments estimation technique on an unbalanced panel data. Findings The empirical results reveal bank size, capital, less-risky liquid assets, risky liquid assets, external funding dependence and market power as significant bank-specific factors in determining maturity transformation risk. However, the authors find no evidence for the effect of bank credit risk on maturity transformation risk in Islamic banking system. Originality/value This is the first study that focuses on the measurement of maturity transformation risk and its determinants in Islamic banks in a cross-country context, with regards to new liquidity regulatory requirements as proposed by Islamic Financial Services Board (IFSB) in conjunction with Basel III.

State ownership and bank performance: conventional vs Islamic banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Turki Alshammari
Keyword(s):  
Banking Sector ◽  
Banking System ◽  
Positive Influence ◽  
State Ownership ◽  
Bank Performance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Banking Systems ◽  
The Impact

Purpose This paper aims to examine the effect of state ownership on bank performance for all banks in the Gulf Cooperation Council (GCC) countries during the period 2003 – 2018, for two distinct banking systems: the conventional and the Islamic banking systems. Design/methodology/approach To achieve the goal of the study, this paper uses a mean t-test to examine the mean difference of the related variables for both banking systems, and a regression test (using the GMM method) to explore the effect of state ownership on bank performance. Findings The most important result of the analysis is that state ownership has a significantly positive influence on bank performance for conventional banks but not for Islamic banks, in the GCC area. Originality/value This study adds to the scarce related literature comparative empirical results with respect to the impact of ownership on the performance of two different banking systems: the conventional system and the Islamic banking system in the GCC area. This study is likely to have implications for policymakers in terms of developing rules relevant to the governance of GCC’s two banking systems that can help to support the stability of the whole banking sector.

scholarly journals Fiqhī views on bayʿwa salaf and qarḍ-based Islamic banking deposit accounts in Malaysia

2017 ◽  
Vol 9 (1) ◽  
pp. 106-112 ◽  
Author(s):  
Mahadi Ahmad ◽  
Riaz Ansary
Keyword(s):  
Financial Services ◽  
Banking System ◽  
Banking Regulation ◽  
Advisory Council ◽  
Inductive Method ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Compliance Level ◽  
Prophetic Tradition

Purpose Islamic banks are obliged to carry out transactions that only comply with Islamic commercial laws. Malaysia has been championing the Sharīʿah-based banking system, and so, continuous improvement on the compliance level of the institutions offering Islamic financial services is key to its global recognition in this industry. One of the issues that can affect deposit products is existence of a sale contract and loan facility in one transaction. Famous prophetic tradition prohibits this. Hence, this paper aims to examine the linkage between bayʿwa salaf (combination between a sale contract and loan in one transaction) and deposits accounts in Malaysia. Design/methodology/approach The subject matter of this paper is one that is researchable within library-based research. It is on this premise the research used the non-empirical qualitative research methodology. It used inductive method of analysis of both Islamic and policy documents on Islamic banking in Malaysia. Literature from Islamic jurisprudence, websites of some of the Islamic banks in Malaysia and relevant resolutions from the Shariah Advisory Council of Central Bank of Malaysia were consulted. Findings Based on the methodology mentioned above, the researchers arrived at the following findings: that, although there is no juristic disagreement about the prohibition of bayʿwa salaf, disagreement, however, occurs in results of some contracts. The most notable area of agreement on the existence of bayʿwa salaf is when there is express stipulation of sale or rendering of service and express or implied stipulation of loan alongside of the sale or service rendering. In an organized reversed tawarruq, the use of these deposits by the banks is regarded as loan from the depositors to the banks, who will soon put the money into sale that will generate profit to be divided between the banks and their depositors. However, this study finds that this is not bayʿwa salaf prohibited by the prophetic tradition. Originality/value The originality of this topic is proven by the new banking regulation regime of Malaysia, which compels Islamic banks to guarantee all deposits under them. As Islamic banks carry out their banking activities through trading, there is need to conduct a research such as this. This is to examine whether Islamic banks’ unilateral use of depositors’ funds in non-investment accounts which is translated, constructively, as loan from the depositors to Islamic banks amounts to bayʿwa salaf before the future tawarruq. Here there is loan and sale, which is the tawarruq. Hence, the need to do this research.

The consumers’ commitment and materialism on Islamic banking: the role of religiosity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Junaidi Junaidi ◽  
Ready Wicaksono ◽  
Hamka Hamka
Keyword(s):  
Structural Equation ◽  
Survey Study ◽  
Equation Modeling ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Positive Effects ◽  
Islamic Bank ◽  
Muslim People ◽  
The Impact

Purpose This paper aims to investigate whether and how religiosity (e.g. extrinsic and intrinsic) influences the mediator variables (consumers’ commitment and materialism) in the Islamic bank consumers context. It also examines how the mediators should be influence consumers’ preferences. Design/methodology/approach In total, 658 Muslim people and Islamic bank consumers were recruited for a survey study and structural equation modeling was used to test the research hypotheses. Findings The empirical results indicate that religiosity (e.g. extrinsic and intrinsic) has significant and positive effects on consumers’ commitment and materialism, whereas intrinsic religiosity has no significant effect on consumers’ commitment which subsequently influences consumers’ preference. Furthermore, mediator variables (e.g. consumers’ commitment and consumers’ materialism) have partial mediators between religiosity and consumers’ preferences. Research limitations/implications The current study was limited to Indonesian Muslim people; there is a future need to study consumers’ attitudes and engagement in religious products and services (e.g. Islamic brands). It is can help practitioners, regulators and researchers to observe the dynamic behavior to elaborate on the impact of religion and Islamic products on consumers’ preference. Practical implications The bank managers and regulators should enhance the information of products and services Islamic banks and the difference principle between conventional banks. Moreover, enlighten the consumers about the principle operation of Islamic banks from the perspective of marketing and religiosity. Originality/value This study contributes to consumers’ behavior literature and, specifically, for the decision-making process through developing and testing a model of religious determinants toward Islamic bank products, as well as offers new insights into the determinants of religion and consumers’ decision process toward Islamic banking.

The roles of domestic and foreign Islamic banks in Malaysian monetary transmission

2014 ◽  
Vol 7 (2) ◽  
pp. 161-169 ◽  
Author(s):  
Fidlizan Muhammad ◽  
Asmak Ab Rahman ◽  
Ahmad Azam Sulaiman
Keyword(s):  
Monetary Policy ◽  
Banking System ◽  
Bank Lending ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Bank Lending Channel ◽  
Content Type ◽  
Lending Channel ◽  
Level Data ◽  
Loan Supply

Purpose – The aim of this paper is to empirically test the presence of the bank lending channel for the Islamic banking system in Malaysia. Design/methodology/approach – Distributional effects from monetary policy changes were analyzed by three bank characteristics such as size, liquidity and capital. Using the econometric model by Kashyap and Stein (1995), the implementation of a policy contraction leads to reduction in loan supply because some banks may not able to offset a reduction in deposits. The paper explores the response shown between domestic and foreign Islamic banks in Malaysia using bank-level data from 2005 to 2010. Findings – The empirical result indicates presence of the bank lending channel in the Islamic banking system in Malaysia, size and liquidity as sources of difference response of financing supply in domestic bank and capital for foreign Islamic bank and Islamic interbank rate as an efficient tool in conducting monetary policy especially in the Islamic banking system. Originality/value – The paper manages to explore the effectiveness of Islamic the monetary policy tools in the Islamic Banking system in Malaysia. Using Islamic interbank rate as a policy tool, it provides valuable view to policy makers, who are analyzing for efficiency of transmission channel.

scholarly journals The impact of Fintech on Islamic banking and the collaboration model: a systematic review studies in Indonesia

2021 ◽  
Vol 9 (4) ◽  
pp. 302-312
Author(s):  
Idah Zuhroh
Keyword(s):  
Systematic Review ◽  
Financial Services ◽  
Banking Sector ◽  
Legal Aspects ◽  
Security Protocol ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Registration System ◽  
Collaboration Model ◽  
The Impact

The Fintech company has raised its number significantly in Indonesia and threatened the banking sector as Islamic Banking is not the exception. Fintech can provide better financial services than Islamic Bank with its technological advantages. This research aims to observe the effect of Fintech's on Islamic banks and discover the collaboration model between Fintech and Islamic banks to improve financial services. The method was carried out by Systematic Literature Review (SLR), then analyzed using Nvivo 12 to quantify the words counted to the papers found. The result showed that there were 14 papers found to analyze in the systematic review. According to Nvivo 12 words counted result, the highest words counted was ‘services’ with 21%, followed by ‘user’ and ‘customers’ combined with 16%. Furthermore, Fintech acts as the disruptor for Islamic Banking, shown in its Return on Asset and its potential to take over the millennial customers segment. The collaboration can be done by sharing product marketing, loans, and transaction services. For the customer, big data analysis, the legal aspects, risk of human error, and data security protocol should be mitigated by tightening the registration system to minimize fraud, enhancing the internet server to prevent failure transactions, and closely cooperating with the Authority of Financial Service in Indonesia (OJK) to ensure the legal aspects are fulfilled.

scholarly journals Impact of Basel Accord on Banking System (Evidence from Islamic Banks of Pakistan)

2015 ◽  
Vol 1 (2) ◽  
pp. 1
Author(s):  
Muhammad Mehtab Azeem ◽  
Akin Marsap ◽  
Cigdem Ozari
Keyword(s):  
Banking System ◽  
Islamic Banking ◽  
Basel Iii ◽  
Islamic Banks ◽  
Basel Accord ◽  
Trade Off ◽  
Financial Anomalies ◽  
Conventional Banks ◽  
The Stability ◽  
The Impact

Banks and bank regulatory authorities are vital players for the stability of economy and financial system in potential way. Basel III and its related to capital’s requirement obligations have been effective useful tool for the banking system. Since, this is tough job for the bankers to maintain the liquidity for hedging the future risk but it also been expensive for bankers to keep the extra capital and become more liquid since this discourage the provision of loans but promote the credit ratings. However, it has become necessary to investigate the impact of Basel III on Islamic banking system and analyze the trade off. The study analyzes empirically on the (Financial) anomalies in term of three factors (i) Financial size (ii) Spread and (iii) Provisions for non performing financing. The study also discusses the impact of Basel III on Islamic banking performance if applicable, in context of trade off and impact on country’s economy. We can ask that Basel III framework is difficult to be consistent for conventional banks; we can also realize that either new regulation will be flexible for Islamic banks under Basel III while Islamic and Conventional banks are totally different. Further, we shall estimate if the Basel III is more or less important in Islamic banks of Pakistan than conventional banks. At the end, we shall see from theoretical framework either the impact of Basel III is important for Islamic banks if and only if Islamic banks adopt to follow Basel III regulations and analyzing the potential influence on conventional banks.

scholarly journals The association between intellectual capital and financial performance in the Islamic banking industry

2019 ◽  
Vol 13 (1) ◽  
pp. 75-93 ◽  
Author(s):  
A.A. Ousama ◽  
Helmi Hammami ◽  
Mustafa Abdulkarim
Keyword(s):  
Financial Performance ◽  
Intellectual Capital ◽  
Positive Impact ◽  
Value Added ◽  
Annual Reports ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Gcc Countries ◽  
The Impact

Purpose The purpose of this study is to empirically investigate the impact of intellectual capital (IC) on the financial performance of Islamic banks operating in the Gulf Cooperation Council (GCC) countries. Design/methodology/approach The study measures IC by the value added intellectual coefficient model. A regression analysis was used to assess the impact of IC on financial performance. The research sample consisted of Islamic banks operating in the GCC countries during the years 2011, 2012 and 2013. Data originated from the annual reports of Islamic banks. Findings The results support the thesis that IC has a positive impact on the financial performance of Islamic banks. Even though the average IC is lower than that reported in other studies, the positive effect on financial performance is obvious. The findings also show that human capital (HC) is higher than capital employed (CE) and structural capital (SC). The study reveals that SC has an insignificant impact on the financial performance of the Islamic banks compared to CE and HC. Practical implications The findings provide empirical evidence that IC affects the Islamic banks’ financial performance. It helps Islamic banks in the GCC countries to understand how to use their IC efficiently, especially SC as it is yet to be used efficiently. Also, the findings benefit the relevant authorities (e.g. legislators and central banks) who could use them to emphasise strategic policy reforms whenever required. Originality/value The current research adds to the empirical studies in the GCC countries as it views the region as a collective as opposed to individual countries. It also extends the IC and performance measurement literature of Islamic banks in the GCC countries. Moreover, the current study enriches the limited literature on IC in the context of Islamic banking.

A review of literature directions regarding the impact of fintech firms on the banking industry

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Haitham Mohamed Elsaid
Keyword(s):  
Financial Services ◽  
Banking Industry ◽  
Banking System ◽  
Advanced Technology ◽  
Review Of Literature ◽  
Strategic Partnerships ◽  
Research Papers ◽  
Content Type ◽  
Fruitful Research ◽  
The Impact

Purpose This paper aims to provide a review of literature directions regarding the potential impact of fintech operators on the financial services market globally. This paper reviews the literature to identify possible benefits or challenges that fintech firms can have for the traditional banking system. Design/methodology/approach This paper is based on a review of published research papers related to fintech and digital finance. The Scopus database, SSRN database and google scholar were used to find relevant research papers. The final sample included impactful papers about the effect of fintech activities on the banking and financial services industry. Findings The current paper indicated that while fintech firms would take some market share away from banks, it is not expected that fintech firms would substitute banks. However, banks are required to accelerate their adoption of innovations and advanced technology to compete with fintech firms. It is also proposed that strategic partnerships and cooperation could happen between banks and fintech companies in a way that benefits both sides. Originality/value The present paper adds to the understanding of the effect of the fintech firms’ growth on the banking industry in light of the emerging opportunities and threats for the financial sector. The paper also provides guidance for fruitful research on the impact of fintech activities on social and economic welfare in the future.

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