scholarly journals Restructuring and Bank Performance in Dual Banking System

2021 ◽  
Vol 10 (2) ◽  
pp. 223-247
Author(s):  
Raditya Sukmana ◽  
Mansor H Ibrahim
Keyword(s):  
Banking System ◽  
Extensive Study ◽  
Bank Risk ◽  
Bank Performance ◽  
Islamic Banking ◽  
Panel Var ◽  
Bank Competition ◽  
Islamic Bank ◽  
Conventional Banks ◽  
The Impact

While extensive study deals with bank competition and performance relationship, this study pioneers in focusing the existence Islamic bank in the presence of well established conventional banking system in Malaysia. This paper assesses the impact of changing competition landscape and Islamic bank penetration on bank risk, profitability and capitalization.  This study utilizes an unbalanced panel dataset consisting of 37 commercial banks over the period 1997 to 2015. the paper uses a panel VAR methodology to discern the interactions between bank competition and Islamic banking presence on one hand and bank performance on the other hand.Findings: We find evidence supportive of both competition – stability and competition – fragility views for conventional banks. The results suggest that bank competition improves conventional bank risk and, at the same time, lower profitability and capital holdings.  As for Islamic banks, competition seems to robustly influence only bank profitability.  Finally, we note that increasing Islamic bank penetration improves the risk profile of conventional banks and, as expected, reduces their market power.  These results bear important implications on the design of competition policies in a dual banking system as well as on the development of the Islamic banking sector.JEL Classification: C23, G21, G28How to Cite:Sukmana, R., & Ibrahim, M. H.. (2021). Restructuring and Bank Performance in Dual Banking System. Signifikan: Jurnal Ilmu Ekonomi, 10 (2), 223-247. https://doi.org/10.15408/sjie.v10i2.20740. 

scholarly journals Islamic Banking in Global Economic Context (Critical Studies of Operational System and Performance of Islamic Banking)

2018 ◽  
Vol 12 (2) ◽  
pp. 343-361
Author(s):  
Jamal Abdul Aziz
Keyword(s):  
Global Scale ◽  
Islamic Banking ◽  
Business Practices ◽  
Distribution Of Wealth ◽  
Islamic Bank ◽  
Need To Evaluate ◽  
Modern Business ◽  
And Performance ◽  
Conventional Banks ◽  
The Impact

Berdasarkan kajian terhadap sejarah kemunculan dan sistem operasional Bank Islam beserta kinerjanya, penulis menyimpulkan bahwa konsep bank Islam pada hakekatnya merupakan bentuk islamisasi terhadap institusi perbankan. Hanya saja proses islamisasi yang terjadi baru sebatas pada aspek-aspek yang bersifat marginal, artifisial, dan formal-institusional, seperti penggantian istilah-istilah teknis dalam dunia perbankan dengan istilah yang berasal dari fikih muamalah, penghapusan bunga, dan penolakan terhadap praktek-praktek bisnis yang haram. Selebihnya, bank Islam tidak berbeda dengan bank konvensional. Dampak dari islamisasi yang kurang substansial-komprehensif tersebut adalah timbulnya kesan bahwa bank Islam justru ‘terbelenggu’ oleh konsep-konsep fikih klasik yang mendasarinya, di mana ia cenderung kontra produktif dengan tren  bisnis moderen yang senantiasa menuntut efisiensi dan fleksibilitas. Agar tetap dapat survive di masa-masa mendatang, bank Islam perlu mengevaluasi diri secara terus menerus dengan selalu membuka diri terhadap berbagai kritikan yang dialamatkan kepadanya. Konsepsi yang terlalu berorientasi kepada doktrin harus diimbangi dengan kesadaran akan fakta-fakta dan tuntutan bisnis moderen, baik yang berskala lokal maupun global. Sementara itu cita-cita Islam yang ideal, seperti pemberantasan kemiskinan, pendistribusian kekayaan secara adil, dan penciptaan lapangan kerja, harus tetap menjadi orientasi utamanya. Kata Kunci:Riba, Profit and Loss Sharing, Mudlârabah, Murâbahah, Artificial Aspects of Islam  Abstract:Based on the study of the history of emergence and operation of Islamic Bank and its system performance, the author conclude that the concept of Islamic bank is essentially a form of Islamization of the banking institutions. Such Islamization are limited to the marginal, artificial, and formal-institutional aspects, such as the replacement of technical terms in the banking world with a term derived from the fiqh al-mu’âmalah, the abolition of interest, and the rejection of unlawful business practices. Moreover, the Islamic bank is no different from conventional banks. The impact of such less substantial and comprehensive islamization is the perception that Islamic bank is precisely 'shackled' by the concepts underlying classical fiqh, where it tends to be counter-productive with modern business trends which are constantly demanding efficiency and flexibility. In order to remain able to survive in the future, Islamic banks need to evaluate itself continuously by always open to criticism addressed to them. The conception of Islamic banking oriented too much to the doctrine must be balanced with an awareness of the facts and the demands of modern business, both local and global scale. While the ideals of the Islamic ideal, such as the eradication of poverty, equitable distribution of wealth and job creation, should remain the main orientation.

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 Factors Influencing Adoption of Islamic Banking: A Study from Pakistan

2014 ◽  
Vol 4 (3) ◽  
pp. 352 ◽  
Author(s):  
Nain Tara ◽  
Madiha Irshad ◽  
Muhammad Rizwan Khan ◽  
Mahwish Yamin ◽  
Muhammad Rizwan
Keyword(s):  
Market Share ◽  
Rural Areas ◽  
Banking Sector ◽  
Banking System ◽  
Islamic Banking ◽  
Muslim Community ◽  
Customer Perception ◽  
Islamic Bank ◽  
Factors Influencing ◽  
Conventional Banks

Islamic banking system was initiated in Pakistan nearly three decades back in 1980 by SBP, through restructuring banking rules and ordinance i.e., it imposed alterations in operations of conventional banks. The first full-fledge Islamic Bank was granted incorporation certificate in 2001. However, the Islamic banking (IB) still seemed to have comparatively low market share. Therefore, the main objective of this study is to scrutinize the awareness, religious perception, and preferences in terms of reputation and networking on IB, of Pakistani community. Hence, a survey was conducted based on 150 respondents, representing Muslim community from metropolitan as well as rural areas, all over the country. Results revealed that there is a significant perceived adoption criteria regarding Islamic Banking. Criteria include factors of importance, starting from the most significant, Awareness regarding financial teachings of Islam, Reputation, Networking and Religion. Thus, the results would be worthwhile for the Islamic banking sector in comprehending the customer perception and preferences regarding IB, and to stimulate it strategically, and for the concerned authorities, in promoting specific regulations and policies that complement the market share of IB.

scholarly journals The impact of Islamic banking model and Islamic financial development on bank performance: evidence from dual banking economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tanveer Ahsan ◽  
Muhammad Azeem Qureshi
Keyword(s):  
Financial Development ◽  
Fixed Effects ◽  
Generalized Method Of Moments ◽  
Bank Performance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Country Level ◽  
Conventional Banks ◽  
The Impact

Purpose The purpose of this study is to develop an Islamic Banking Index representing the Islamic banking model and to investigate its impact on the performance of Islamic and conventional banks. This study also analyzes the impact of Islamic financial development on bank performance. Design/methodology/approach The authors collected the data from 23 countries for the period from 2010 to 2018 and developed a composite Islamic Banking Index. The authors applied the generalized method of moments on 3,542 bank-year observations for both Islamic and conventional banks to analyze the impact of the Islamic Banking Index on bank performance. The results of the study are robust to time-fixed effects, country-level time-varying factors and endogeneity issues. Findings The authors found that Islamic Banking Index positively contributes to the return on assets (ROAit) of Islamic banks only. This impact becomes highly significant in countries with comparatively higher Islamic financial development. This finding suggests that the Islamic financial development in a country provides a supportive operating environment to Islamic banks and increases their performance. The authors also found that Islamic Banking Index positively contributes to the return on equity (ROEit) of both types of banks. Practical implications The authors argue that moving away from interest-based products and focusing more on diversified portfolios can boost the performance of both types of banks without increasing their risk levels. Originality/value To the best of the authors’ knowledge, this is the first study that develops a composite Islamic Banking Index based on differentiating factors of the Islamic banking model and investigates the impact of Islamic Banking Index and Islamic financial development on bank performance.

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.

Analisis Kinerja Bank Syariah di Indonesia Dengan Pendekatan Sharia Maqashid Index (SMI)Tahun 2016-2018

2021 ◽  
Vol 11 (2) ◽  
pp. 35-44
Author(s):  
Ihda Lasna Sari ◽  
Fajri Ryan Isnandar
Keyword(s):  
Annual Report ◽  
Bank Performance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Performance Measurements ◽  
Islamic Bank ◽  
Conventional Banks ◽  
Index Value ◽  
Individual Education

This study aims to analyze the performance of Islamic banks using the Sharia Maqashid Index.The variables used in this method adopt Abu Zahra’s maqashid sharia theory, namely Tahdhib alFardh (Individual Education), Iqamah al Adl (Enforcing Justice), and Jalb al Maslahah (Achievementof welfare). From these variables finally obtained 10 performance ratios used in measuring theperformance of Islamic banks, which are then given the respective weights. The existence of thismethod originated from the inadequacy of Islamic bank performance measurements that use generalperformance measurements commonly used in conventional banks in general. This performancemeasurement was promoted by Mustafa Omar, et al in 2008 in his research entitled “The PerformanceMeasures of Islamic Banking Based on the Maqasid Framework”. The object of this research is 12BUS in Indonesia. The data used is the annual report of 12 BUS in 2016-2108. The results of thisstudy indicate that among 12 BUS in Indonesia, Bank Panin Dubai Syariah obtained the highestSMI value with an index value of 36.75. These results indicate that Panin Dubai Syariah Bankhas a good performance using the Sharia Maqashid Index. Rank 12 BUS in Indonesia as follows:Bank Panin Dubai Syariah, Bank Victoria Syariah, BCA Syariah, Bank Muamalat Indonesia, BankSyariahBukopin, BTPN Syariah, Bank BRI Syariah, Bank BNI Syariah, Bank SyariahMandiri,MaybankSyariah Indonesia, Bank JabarBanten Sharia, and Bank Mega Syariah.

scholarly journals The Impact of Regulatory Capital and Bank Characteristics on the Relationship between Bank Competition and Risk Taking in the Banking System

2021 ◽  
Vol 28 (1) ◽  
pp. 87
Author(s):  
Eman Abdel-Wanis
Keyword(s):  
Risk Taking ◽  
Negative Impact ◽  
Positive Impact ◽  
Banking System ◽  
Bank Risk ◽  
Bank Competition ◽  
Regulatory Capital ◽  
The Impact ◽  
The Relationship ◽  
Positive Effect

This paper explores the association between bank competition, regulatory capital, and bank risk taking in an Egyptian setting and to examine the interaction between bank competition and regulatory capital and their impact on bank risk taking in developing countries like Egypt and also investigate the effect of bank characteristics on the relationship between bank competition and bank risk taking through a sample of 27 Egyptian listed banks during the period 2012-2018 using OLS regression . Results indicated that there is a negative impact of bank competition on the bank risk taking and a positive effect of regulatory capital on bank risk taking in the Egyptian listed banks. Results show that increase regulatory play a vertical role in enhance association between competition and bank risk taking and also, there is a positive impact of bank characteristics like: bank size and divarication on bank risk taking in the Egyptian banks. Results refer to there is no effect of bank type, leverage and profitability to support the relationship between bank competition and risk taking

scholarly journals The Impact Of Covid-19 On Islamic Banking In Indonesia During The Pandemic Era

2020 ◽  
Vol 8 (2) ◽  
pp. 19-32
Author(s):  
Zulfikar Omar
Keyword(s):  
Economic Crisis ◽  
Banking System ◽  
Profit Sharing ◽  
The Other ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Conventional Banks ◽  
Asset Quality ◽  
The Impact ◽  
National Banking System

The impact of COVID-19 on Islamic banking can be analysed into three possible risks, such as financing risks, impairment of assets, and tightening the profit-sharing system. Compared to conventional banks, Islamic banking is more flexible in meeting the economic crisis caused by the COVID-19 pandemic. Basically, the national banking system had predicted trouble due to the COVID-19 epidemic. On the other hand, Islamic banks are at an advantage with the theory of profit-sharing, thus increasing its effectiveness in dealing with crises. Islamic banks’ dominance throughout these challenging times is undoubtedly an excellent opportunity to strengthen their market share. Besides, Islamic banks can face risks, such as providing loans, deteriorating asset quality, and tightening profit sharing. Therefore, Islamic banks must understand these risks to ensure their plans during the COVID-19 pandemic. Admittedly, performing restricted expansion into the digital share is a challenging decision that should be practised by Islamic banks. In view of the recent pandemic, this study aimed to analyse the three risks faced by Islamic banking in Indonesia.

scholarly journals IMPACT OF ISLAMIC BANKING INCLUSION ON SME EMPLOYMENT GROWTH IN NIGERIA

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Tasiu Tijjani Sabiu ◽  
Muhamad Abduh
Keyword(s):  
Employment Growth ◽  
Banking System ◽  
Islamic Banking ◽  
Positive Effects ◽  
Islamic Bank ◽  
Credit Lines ◽  
Bank Financing ◽  
Quasi Experimental ◽  
The Impact ◽  
Matching Techniques

Despite the considerable resources devoted to SMEs by Islamic banks worldwide, and Nigeria in particular, there has been no rigorous empirical evidence regarding the effectiveness of Islamic banking inclusion on employment growth in SMEs globally. This study fills this gap by analysing the effectiveness of access to Islamic banking financing in promoting MSME's growth in Kano Metropolis, Nigeria. We focus on the impact of the credit lines facilitated by Jaiz Bank Plc in fostering firms’ growth measured in terms of employment. A survey based on a quasi- experimental approach was employed and the data were collected by means of a questionnaire distributed to a sample of 385 MSMEs' beneficiaries and non-beneficiaries of Islamic bank financing in Kano Metropolis, Nigeria. Using difference-in-difference and propensity score matching techniques to deal with selection bias, the study found significant positive effects on MSMEs’ employment growth. In addition, the paper highlights the important role of Islamic bank financing in mitigating the unemployment crisis in Nigeria. The paper recommends that improvement of the Islamic banking system by employing PLS financing, especially Musharaka, could foster MSMEs' financial inclusion and job creation.

scholarly journals Liquidity risk and regulation in the Organization of the Islamic Cooperation (OIC) banking industry

2021 ◽  
Vol 17 (2) ◽  
pp. 29-62
Author(s):  
Syajarul Imna Mohd Amin ◽  
Aisyah Abdul-Rahman ◽  
Nurhafiza Abdul Kader Malim
Keyword(s):  
Risk Management ◽  
Generalized Method Of Moments ◽  
Banking System ◽  
Liquidity Risk ◽  
Banking Regulation ◽  
Capital Requirements ◽  
Islamic Banking ◽  
Private Monitoring ◽  
Conventional Banks ◽  
The Impact

The recurring crises have evidenced poor liquidity risk management and ineffective regulation in banking. Consequently, banking regulations have undergone continuous reforms to bolster stability in the banking system. Nonetheless, theoretical and empirical evidence provide conflicting results that warrant comprehensive research, particularly for emerging Islamic banking. This study examines the role of banking regulation on the liquidity risk of 245 conventional banks and 68 Islamic banks from selected 14 Organization of the Islamic Cooperation (OIC) from 2000 to 2017 utilising the dynamic panel GMM (generalized method of moments) technique. We measure liquidity risk using the Net Stable Funding Ratio (NSFR) and the total financing-to-total deposits and short-term funding (LDEP). Meanwhile, the regulatory measures are asset restriction (AR), private monitoring (PM), supervisory power (SP) and capital requirements (CR). The findings suggest that regulation has a limited impact on bank liquidity risk. The CR supports the value creation of regulation through the reduction in banks’ liquidity risks, while PM and SP are agency costs of regulation that lead to higher liquidity risks. The impact of CR is lower on liquidity risk in Islamic banking than conventional ones, probably due to limited Islamic liquidity risk management facilities. Thus, regulators should strengthen Islamic liquidity risk instruments and markets to facilitate Islamic banking growth.

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