scholarly journals Country comparative assessment of Islamic banks' financial economic situation

2020 ◽  
Vol 12 (2) ◽  
Author(s):  
Tariq Jarbou ◽  
Jorge Katsumi Niyama
Keyword(s):  
Financial Services ◽  
Financial Economic ◽  
Comparative Assessment ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Financial Indicators ◽  
Financial Systems ◽  
Islamic Financial Institutions ◽  
Bank Solvency ◽  
Asset Quality

Purpose: Promote a country comparative assessment of the Islamic banks economic and financial situation. Methodology: We used a descriptive and documentary analytical approach. We collected data on Islamic bank financial indicators in 21 countries and analyzed it in light of the standards recommended by the Islamic Financial Services Board (IFSB) and the Basel Committee on Banking Supervision (BCBS). The sample consisted of all countries with available data in the IFSB database (PSIFIs). Data refers to the second quarter of 2018 grouped by countries. We used a simple descriptive statistic, in figures form, to analyze the collected data. Results: This document points out that 90% of Islamic financial institutions (IFIs) in the sample calculate the capital adequacy ratio (CAR) according to BCBS recommendations. In addition, 95% have CARs above 8% (the minimum set by BCBS and IFSB). Therefore, 95% of countries have secure financial systems in terms of bank solvency. In terms of asset quality, the Islamic financial system in Oman showed the best quality in managing its resources. Sudan has shown the highest ratios of profitability in its Islamic banks. In the liquidity analysis, it was not possible to identify precisely which country has the best liquidity ratios in short and long term as more than 60% of the countries did not present sufficient data. In terms of net assets over total assets, and short-term compliance, the Islamic financial systems of Egypt and Afghanistan, respectively, led with better liquidity ratios, showing the ability and security to meet their obligations. Contributions of the Study: Identify countries with the highest / lowest risk considering IFSB and BCBS requirements and recommendations.

scholarly journals Evaluation and Comparison of Financial Soundness of Islamic and Conventional Private Commercial Banks in Bangladesh: A CAMEL Approach

2020 ◽  
pp. 128-140
Keyword(s):  
Quality Management ◽  
Stock Exchange ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Management Quality ◽  
Significant Difference ◽  
Financial Soundness ◽  
Marginal Status ◽  
Conventional Banks ◽  
Asset Quality

This article evaluates and compares the financial soundness of Islamic and conventional PCBs operating in Bangladesh based on the CAMEL approach over the period 2015 to 2019. For this purpose, the authors select a sample of 17 Conventional PCBs and 6 Islamic PCBs listed on the Dhaka Stock Exchange. In terms of composite CAMEL ratings, none of the banks is found to be strong or satisfactory in financial soundness in 2019. Out of 17 conventional banks, 13 of them are in a fair position i.e. having financial, operational, or compliance weakness and need more than normal supervision and regulation to address the deficiencies. Another 4 conventional banks are in a marginal position means that they are in serious financial problems and need close supervision and regulation. Ranking of conventional banks based on composite CAMEL ratings shows that Brac Bank Ltd. is in top position (Score 2.65) with Bank Asia Ltd. securing second position (score 2.7) while AB Bank Ltd., IFIC Bank Ltd, One Bank Ltd., and Mutual Trust Bank Ltd. are in the worst position with marginal status. Among 6 Islamic banks, 5 are in a fair position and only 1 in a marginal position in 2019. Shahjalal Islami Bank Ltd. secures the top position (Score 2.8) with fair status and Social Islami Bank Ltd. is in the worst position with marginal status. Independent sample test is used to see whether there is any significant difference between Islamic and Conventional PCBs concerning CAMEL parameters. The study finds that except for liquidity there is no significant difference in capital adequacy, asset quality, management quality, and earnings quality. The study also reveals that there is no significant difference in the average CAMEL ratings of two types of Banking. However, on average Islamic banks have better asset quality, management quality while conventional banks have better capital adequacy, earnings, and liquidity.

What Are the Leading Bank-Specific and Macroeconomic Factors Influencing Islamic Bank Performance?

2021 ◽  
pp. 153-171
Author(s):  
Mosharrof Hosen
Keyword(s):  
Positive Impact ◽  
Least Square ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Cross Sectional ◽  
Macroeconomic Factors ◽  
Mena Countries ◽  
Ordinary Least Square ◽  
Islamic Bank ◽  
Asset Quality

Despite the proven sustainability and growth of Islamic banks during the financial crisis period, many scholars criticise the current performance of Islamic banks. Therefore, policymakers are continuously getting worried due to inconclusive finding of different research related to Islamic bank profitability. To shed the light of raising concern, this study investigates the issue from considering both macroeconomic and bank-specific factors. The annual cross-sectional data has been collected from 46 Islamic banks in 10 selected MENA countries over the period 2015-2019. The standardized pooled ordinary least square (OLS) approach's findings revealed that bank size, capital adequacy, GDP, and inflation have a significant positive impact on Islamic banks' return on asset, but asset quality has no significant effect on ROA. In contrast, most of the variables have an insignificant effect of ROE. Investors, financial analysts, and policymakers will get benefits from this study's results to secure their investment by successfully controlling the above-mentioned leading factors.

The Use Of CAMELS In Detecting Financial Distress Of Islamic Banks In Malaysia

2014 ◽  
Vol 30 (2) ◽  
pp. 445 ◽  
Author(s):  
Rashidah Abdul Rahman ◽  
Mazni Yanti Masngut
Keyword(s):  
Neural Network ◽  
Quality Management ◽  
Financial Distress ◽  
Capital Adequacy ◽  
Advisory Council ◽  
Annual Reports ◽  
Islamic Banks ◽  
Return On Assets ◽  
Management Quality ◽  
Asset Quality

The current study uses CAMEL (Capital Adequacy, Asset Quality, Management Quality, Earnings Efficiency, and Liquidity) ratings system, with the addition of Shariah Compliance Ratio (CAMELS) in order to detect the financial distress of Islamic banks in Malaysia. Using neural network, the study analyses data collected from the 17 Islamic banks annual reports for the period 2006 to 2010. It was found that all Islamic banks have higher ETA ratios which portray a good performance of capital adequacy and are less likely to face financial distress. As for asset quality, all Islamic banks did not have the possibility to face financial distress as they are able to handle their non-performing loans throughout the years. Meanwhile for management quality, all Islamic banks show lower ratios in paying salaries to their employee. Earning efficiency for all Islamic banks show better performance and will be less likely to face financial distress in terms of return on assets but not for return of equity. Liquidity indicates that the Islamic banks have a large number of loans but they have sufficient liquid assets in order to cover their liabilities and commitments. Lastly for Shariah Compliance, Islamic banks have complied with all rules and regulations that have been regulated by Bank Negara Malaysias Shariah Advisory Council.

scholarly journals The effect of asset quality, profit and loss sharing on Sharia Banking Liquidity in Indonesia

2022 ◽  
Vol 27 ◽  
pp. 423-436
Author(s):  
Anggraeni Anggraeni ◽  
Yulis Maulida Berniz
Keyword(s):  
Gross Domestic Product ◽  
Profit Sharing ◽  
Capital Adequacy ◽  
Domestic Product ◽  
Islamic Banks ◽  
Return On Assets ◽  
Investment Bank ◽  
For Profit ◽  
Capital Adequacy Ratio ◽  
Asset Quality

This study aims to determine the effect of asset quality variables (Non-Performing Financing), Profit and Loss Sharing (profit-loss sharing investment and profit-sharing investment account), capital adequacy ratio, bank size, return on assets, and gross domestic product on Islamic banking liquidity in Indonesia. The analysis was conducted using a sample of 7 Islamic commercial banks from the period March 2015 to December 2019. This study uses 2 multiple regression models of panel data with the results showing that Non-Performing Financing, profit-loss sharing investment, bank size, gross domestic product affect the liquidity of Islamic banks. , then for-profit sharing investment account, capital adequacy ratio, return on assets, does not affect the liquidity of Islamic banks.

Need for calibration: applying a maximum threshold to liquidity ratio for Islamic banks

2020 ◽  
Vol 13 (1) ◽  
pp. 56-74
Author(s):  
Muhammed Habib Dolgun ◽  
Adam Ng ◽  
Abbas Mirakhor
Keyword(s):  
Financial Services ◽  
Risk Sharing ◽  
Financial Intermediation ◽  
Capital Adequacy ◽  
Islamic Banking ◽  
Alternative Mechanism ◽  
Islamic Banks ◽  
Content Type ◽  
Coverage Ratio ◽  
The Right

Purpose The purpose of this paper is to highlight the effects of liquidity regulations on Islamic banking using Turkey as a case study. It recommends an alternative mechanism using capital market standards for liquidity requirement of Islamic banks to mitigate certain risks. Design/methodology/approach The paper evaluates the correlation between cash and profit and between liquidity coverage ratio and capital adequacy ratio of participating banks in Turkey. Findings Islamic banks hold higher cash than they should. The paper suggests a maximum liquidity ratio for Islamic banks. Applying a cap to the liquidity coverage ratio will impose discipline on Islamic banks to manage their assets appropriately as well as to encourage their financial intermediation to the real sector. In addition, the authors argue that even if the cash outflows from investment account on the right side of Islamic banks’ balance sheets are included in the short-term projection, they should not be included in the denominator of the liquidity coverage ratio. Practical implications The current Basel requirements and Islamic Financial Services Board standards are disincentives to Islamic banks to provide risk-sharing or partnership-based investments and services to their customers and depositors. Effective legal and regulatory framework and supervisory oversight need to take into account the difference between the risk profile of a typical Islamic bank and a conventional bank. Originality/value Although it is well accepted that without adequate regulatory involvement it would not be possible to control and mitigate the risks related to Islamic banking financial intermediation, there should be a balance between the growth and stability of the industry. The regulatory involvement that satisfies this balance would be welcome.

scholarly journals Performance Efficiency of Islamic Banks in Pakistan: An Application of CAMEL Model

2021 ◽  
Vol 3 (1) ◽  
pp. 23-30
Author(s):  
ABDUL WASAI ◽  
DR. SHAMS-UR-RAHMAN ◽  
AAMIR KHAN
Keyword(s):  
Asset Management ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Bankruptcy Risk ◽  
Policy Makers ◽  
Time Period ◽  
Management Ability ◽  
Asset Quality ◽  
High Degree ◽  
Insight Into

This paper aims at evaluating the soundness of Islamic banks working in Pakistan for the period 2008 to 2015. The current study comprises of five full fledge Islamic banks, actively working in Pakistan. The study applied CAMEL parameters to achieve its purpose. It has utilized capital adequacy, Asset quality, Management ability, Earnings ability and liquidity ratios of selected banks. The findings of the study show that although Islamic banks in Pakistan have adequate capital, yet they have limited asset management ability and substandard earnings ability during the selected time period. The study also depicted that Islamic banks have high degree of liquidity thus enjoying low bankruptcy risk. The findings of this study is of prime interest for the management and shareholders of the selected banks. On one hand, the results of this study provide an insight into the performance of these banks. On the other hand, the results also contain useful information for managers and policy makers as they could find and correct easily, the weak areas of their respective institutions.

scholarly journals A Analysis of Islamic Banks in Indonesia and Malaysia Using CAMEL

2020 ◽  
Vol 13 (1) ◽  
pp. 88-99
Author(s):  
Pipin Lestari
Keyword(s):  
Data Analysis ◽  
Financial Performance ◽  
Analytical Tool ◽  
T Test ◽  
Capital Adequacy ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Muslim Population ◽  
Management Quality ◽  
Asset Quality

Indonesia is a country with the largest Muslim population in ASEAN, but in Islamic banking Indonesia is still lagging behind Malaysia. This study compares the financial performance of Islamic banking in both countries with the CAMEL method. There are five aspects to the CAMEL approach, namely Capital Adequacy (CAR), Asset Quality (NPF), Management Quality (NPM), Earnings (ROA, BOPO), and Liquidity (FDR). The analytical tool used is a different t-test to find out whether there is a difference or not between the financial performance of Indonesian and Malaysian sharia. From the results of data analysis with the Independent t-test three variables namely (NPF, NPM, BOPO) showed significant differences, while the variables (CAR, ROA, and FDR) there were no significant differences between Indonesian and Malaysian banks.

scholarly journals Evaluation of the Financial Performance between Traditional Private Commercial Banks and Islamic Banks in Bangladesh

2020 ◽  
Vol 4 (2) ◽  
pp. 1-10
Author(s):  
S. M. Akber ◽  
Asha Dey
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Standard Test ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Test Format ◽  
Average Ratio ◽  
Significant Difference ◽  
Asset Quality

The paper analyzes and evaluated the performance of Islamic banks and Traditional private commercial banks in Bangladesh with a duration from 2015 to 2019. The basis of the analysis used in this paper is CAMEL test.  All the relevant data has collected from the bank’s websites. To measure and compare the performance this paper has used a sample of five Islamic banks and five Traditional private commercial banks. It considered the average ratio of each year.  A standard test format (CAMEL tests) has used to analyze the performance of Islamic and Traditional private commercial banks. To justify the reliability of the data this paper has used t-tests. The outcome of this paper says that apart from the quality of the management significant difference doesn’t exist between the performance of Islamic Banks and Traditional private commercial banks in Bangladesh based on CAMEL test. Considering the quality of the management and asset quality Traditional private commercial banks perform better, but for the capital adequacy and liquidity position Islamic banks perform better in Bangladesh.

scholarly journals Factors Affecting Profit Distribution Management in Sharia Banks in Indonesia

2019 ◽  
Author(s):  
Rimi Gusliana Mais ◽  
Hendrawati . ◽  
Herry Eka Putra
Keyword(s):  
Financial Services ◽  
Hypothesis Test ◽  
Capital Adequacy ◽  
Third Party ◽  
Islamic Banks ◽  
Distribution Management ◽  
Factors Affecting ◽  
Profit Distribution ◽  
Capital Adequacy Ratio ◽  
Data Collection Technique

This study aims to determine the effect of Capital Adequacy Ratio, Effectiveness of Third Party Funds and Risk of Financing on Distribution Management Profit in Islamic Banks in Indonesia in 2013-2017. The strategy used is associative causal. This type of research is quantitative. The data of this study are secondary. The population of this study is Islamic banks in Indonesia that have been officially registered in the Financial Services Authority (OJK) from 2013 to 2017. The research sample is determined by purposive sampling method, so that the number of samples, there are 10 Islamic banks. The data collection technique used is the documentation obtained through the from each bank sample. The research method used is multiple regression analysis, descriptive statistical analysis, classic assumption test and hypothesis test. The data processing tool used is Eviews 9.0 software with panel data regression method. The results of this study are (1) Capital Adequacy Ratio has an effect on Profit Distribution Management, (2) Effectiveness of Third Party Funds does not affect the Distribution ManagementProfit,(3)FinancingRiskhasaneffectonProfitDistributionManagement.

scholarly journals The formulation of financial, governance and social index of Malaysian Islamic banks: An integrative approach.

2016 ◽  
Vol 6 (1) ◽  
pp. 64-70 ◽  
Author(s):  
Asri Marsidi ◽  
Hairul Azlan Annuar ◽  
Abdul Rahim Abdul Rahman
Keyword(s):  
Financial Services ◽  
Relevant Information ◽  
Social Reporting ◽  
Integrative Approach ◽  
Islamic Banks ◽  
Economic Perspective ◽  
The Social ◽  
Financial Governance ◽  
Islamic Financial Institutions ◽  
Social Part

The study proposes and discusses the development of an index of Islamic Financial and Social Reporting (IFSR) for Islamic banks. The index of IFSR is carefully developed based on the relevant and applicable standards, guidelines and literature from an Islamic perspective such as the Malaysian Accounting Standards Board (MASB), Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), Islamic Financial Services Board (IFSB), Bank Negara Malaysia (BNM) and Islamic social reporting literature. The index is developed in three parts, namely, financial, social, and auditing and governance. The items within the finance section are developed to ensure that the Islamic banks disclose relevant financial information. The items for the social part aim to ensure that the Islamic banks provide the relevant information regarding social and environment. The items within the auditing and governance part are developed to ensure that the Islamic banks provide relevant information regarding the monitoring and supervising activities that the Islamic banks have undertaken. The IFSR index may be lacking in terms of its usage generalisability as it is specifically developed for IFIs. The developed index of IFSR aims to promote a more appropriate level of disclosure among the Islamic banks. The need for the index is motivated by the growing importance of Islamic banks, not only from the economic perspective but also from the social perspective.

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