Analysis of The Influence of Liquidity, Credit and Operational Risk, in Indonesian Islamic Bank’s Financing for The Period 2007-2013

The purpose of this paper is to analyze the influence of credit, liquidity and operational risks in six Indonesian’s islamic banking financing products namely mudharabah, musyarakah, murabahah, istishna, ijarah and qardh, in order to try to discover whether or not Indonesian islamic banking is based on the “risk-sharing” system. This paper relies on a fixed effect model test based on the panel data analysis method, focusing on the period from 2007 to 2013. The research is an exploratory and descriptive study of all the Indonesian islamic banks that were operating in 2013. The results of this study show that the Islamic banking system in Indonesia truly has banking products based on “risk-sharing.” We found out that credit, operational and liquidity risks as a whole, have significant influence on mudarabah, musyarakah, murabahah, istishna, ijarah and qardh based financing. There is a correlation between the credit risk and mudarabah based financing, and no causal relationship between the credit risk and musharaka, murabahah, ijarah, istishna and qardh based financing. There is also correlation between the operational risk and mudarabah and murabahah based financing, and no causal relationship between the operational risk and musharaka, istishna, ijarah and qardh based financing. There is correlation between the liquidity risk and istishna based financing, and no causal relationship between the liquidity risk and musharaka, mudarabah, murabahah, ijarah and qardh based financing. A major implication of this study is the fact that there is no causal relationship between the credit risk and musharakah based financing, which is the mode of financing where the islamic bank shares the risk with its clients, but there is an influence of credit risk toward mudarabah mode financing, a financing mode where the Islamic bank bears all the risk. These findings can lead us to conclude that the Indonesian Islamic banking sector is based on the “risk sharing” system.

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Analysis of The Influence of Liquidity, Credit and Operational Risk, in Indonesian Islamic Bank’s Financing for The Period 2007-2013

Gadjah Mada International Journal of Business ◽

10.22146/gamaijb.8507 ◽

2015 ◽

Vol 17 (3) ◽

pp. 279 ◽

Cited By ~ 1

Author(s):

Ousmane Diallo ◽

Tettet Fitrijanti ◽

Nanny Nanny Tanzil

Keyword(s):

Credit Risk ◽

Causal Relationship ◽

Risk Sharing ◽

Banking Sector ◽

Panel Data Analysis ◽

Banking System ◽

Liquidity Risk ◽

Operational Risk ◽

Islamic Banking ◽

Islamic Bank

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Factors Influencing Adoption of Islamic Banking: A Study from Pakistan

Journal of Public Administration and Governance ◽

10.5296/jpag.v4i3.6677 ◽

2014 ◽

Vol 4 (3) ◽

pp. 352 ◽

Cited By ~ 13

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.

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Determinants of Islamic Bank Credit Risk in ASEAN Countries

Journal of Emerging Economies and Islamic Research ◽

10.24191/jeeir.v8i3.8851 ◽

2020 ◽

Vol 8 (3) ◽

pp. 1

Author(s):

Kamarudin Othman ◽

Jamilah Binti Laidin ◽

Nor Azira Ismail

Keyword(s):

Credit Risk ◽

Interest Rates ◽

Data Model ◽

Banking System ◽

Bank Credit ◽

Islamic Banking ◽

Internal Factors ◽

Islamic Bank ◽

Long Run ◽

Asean Countries

Ialamic banking system have been establish more than 30 years ago around the world. However, until today it still facing a lot of obstacles especially in term of credit risk. Thus, the aims of this study is to examine the external (macroeconomic) and internal economic factors that influencing Islamic bank credit risk in ASEAN countries. By using 29 of Islamic banking data in ASEAN from years 2011 until 2018, panel data model was applied in this study. The results from the long run regression of FLOMS, DLOS and PMG suggest management efficiency (MGT) and capital ratio (CR) are the internal factors affects the credit risk of ASEAN Islamic bank. Economic growth, inflation and interest rates are external factors that also found could influencing the Islamic bank credit risk. More research ought to be carried out so that one can understand how credit risk is created in Islamic banking. The finding obtained will provide the further understanding of how Islamic banks should tackle the obstacles they face in order to manage their credit risk

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Risk Reporting of the Banking Sector of Bangladesh: A Time Horizon Analysis

Asian Journal of Finance & Accounting ◽

10.5296/ajfa.v10i1.12804 ◽

2018 ◽

Vol 10 (1) ◽

pp. 178

Author(s):

Niluthpaul Sarker ◽

Shamsun Nahar

Keyword(s):

Credit Risk ◽

Time Horizon ◽

Banking Sector ◽

Banking System ◽

Operational Risk ◽

Market Risk ◽

Bank Risk ◽

Financial Disclosures ◽

Risk Disclosures ◽

Risk Reporting

The study focused on the practical scenarios of bank risk disclosures where it is assumed that adequate risk disclosures expand the path of transparency in the marketplace. The reason is that the financial disclosures, including risk items, represent their image of the current and potential investors, and can impact their mentality about investment. The research analyzed the credit risk, market risk and operational risk reporting intensities in their reports. It is noted that the maximum Risk Weighted Assets (RWA) are held for credit risk of the banking system whereas the remaining part of the system utilized by the market risk and operational risk. It is found that the risk for the top five (5) or the top ten (10) banks is extremely high. The concentration symptom of risk is not good as the fewer borrowers occupied the most of the credit.

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Credit Risk and Operational Risk Determinants of Conventional and Islamic Banking in Malaysia and Bahrain

Asia Proceedings of Social Sciences ◽

10.31580/apss.v7i1.1742 ◽

2021 ◽

Vol 7 (1) ◽

pp. 30-33

Author(s):

Norazwa Ahmad Zolkifli ◽

Zanita Ismail ◽

Nurul Syamshida Mokhtar

Keyword(s):

Risk Management ◽

Credit Risk ◽

Panel Data Analysis ◽

Banking System ◽

Operational Risk ◽

Financial Statements ◽

Annual Reports ◽

International Banking ◽

Conventional Banks ◽

Risk Determinants

The focus of this study on both Islamic and conventional banks is to consider the unique duality banking system in the countries. Data is obtained from annual reports and websites of selected banks. Financial statements for 10 years beginning from 2009 until 2018 were used for extracting data for analyzing the credit and operational risk using E-view software. Furthermore, panel data analysis were used in combination with time series and cross section. The findings reveal that the determinants of credit risk and operational risk are difference between banking in Malaysia and Bahrain. The banking system will have a solid risk management system that will assist Malaysia and Bahrain to develop a strong economy as well as the possible adoption of risk management by the international banking system.

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The Legal Conundrum Of Non-Interest Banking. A Case Study Of Islamic Bank In Nigeria.

International Journal of Scientific Research and Management ◽

10.18535/ijsrm/v7i7.lla02 ◽

2019 ◽

Vol 7 (07) ◽

Author(s):

Miebaka Nabiebu ◽

Michael Takim Otu

Keyword(s):

Banking Sector ◽

Banking System ◽

Legal Framework ◽

Islamic Banking ◽

Religious Leaders ◽

Development Fund ◽

National Assembly ◽

Islamic Bank ◽

The Social ◽

Heated Debate

The issuance of license to Jaiz bank plc as the first full-flesh Islamic bank in Nigeria to carry on Non-interest banking has generated heated debate among scholars, jurist, religious leaders and public commentators in Nigeria. Chiefly among these debate borders on the constitutionality of Non-interest (Islamic) banking in Nigeria; whether or not Islamic banking is established with the aim of Islamizing the entire Nigeria and whether or not it is meant to discriminate against Non-Muslims in Nigeria. Consequently, this work seek to appraise the legal conundrum or constitutionality of Islamic banking in Nigeria with a view to ascertaining whether or not Islamic banking is meant to Islamize Nigeria or it is meant to discriminate against non-Muslims. However the outcome of this research article shows that Islamic (Non- interest) banking is constitutional and is not meant to discriminate against Non- Muslims or Islamize Non-Muslims. Rather with the practice of dual banking (interest and non interest banking) in Nigeria, Nigerians would have the advantage of having different credit choices, the Nigerian banking sector would be more competitive thus enhance quality services, creation of more employment opportunities and would give the Nigerian government the opportunity to secure non-interest loan from Islamic development fund available globally to finance infrastructural projects. This work further concludes that the major challenge this banking system is facing in Nigeria is lack of adequate awareness about the operation of the banking system and lack of robust legal framework to adequately regulate the system. It is therefore suggested that a more comprehensive legal framework should be enacted by the Nigerian National Assembly to appropriately regulate the non-interest banking sector as well as creation of more awareness about the operation of the system through the social media, town hall meetings, newspapers and radio commentaries.

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Arah Kebijakan Pengawasan terhadap Perbankan Syariah dalam Sistem Perbankan Nasional di Indonesia

Volksgeist Jurnal Ilmu Hukum dan Konstitusi ◽

10.24090/volksgeist.v3i1.3498 ◽

2020 ◽

Vol 3 (1) ◽

pp. 41-52

Author(s):

Andrew Shandy Utama

Keyword(s):

Central Bank ◽

Financial Services ◽

Banking System ◽

Islamic Banking ◽

Legal Research ◽

Islamic Bank ◽

Independent Direction ◽

National Banking System

This research aims to explain the direction of policy regarding supervision of Islamic banking in the banking system in Indonesia. The method used in this research is normative legal research using the statutory approach. The results of this research explain that the policy regarding supervision of Islamic banking in the national banking system in Indonesia is headed toward an independent direction. In Law Number 7 of 1992 and Law Number 10 of 1998, it is stated that supervision of Islamic banking is done by Bank Indonesia as the central bank. Based on Law Number 21 of 2008, supervision of Islamic banking is strengthened by not only being supervised by Bank Indonesia, but also by the National Sharia Council of the Majelis Ulama Indonesia by placing Sharia Supervisory Councils in each Islamic bank. After the ratification of Law Number 21 of 2011, supervision of Islamic banking moved from Bank Indonesia to an independent institution called the Financial Services Authority.

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Political risk and banking sector performance in Nigeria

Banks and Bank Systems ◽

10.21511/bbs.16(3).2021.01 ◽

2021 ◽

Vol 16 (3) ◽

pp. 1-12

Author(s):

Adefemi A. Obalade ◽

Babatunde Lawrence ◽

Joseph Olorunfemi Akande

Keyword(s):

Credit Risk ◽

Stock Price ◽

Banking Sector ◽

Generalized Method Of Moments ◽

Banking System ◽

Political Risk ◽

Political Systems ◽

Business Outcomes ◽

Stage System ◽

The Stability

Political risk is prevalent in Nigeria and tends to influence business outcomes and the stability of the banking system. As a result of this study, it was determined whether political risk matters to the performance of the banking sector in Nigeria. The effect of political risk on different banks’ performance measures, such as return on assets, return on invested capital, credit risk and stock price, were examined in a panel of 12 selected commercial banks for the period 2006–2018. Data was analyzed using a two-stage system of generalized method of moments. The results provided evidence that the effect of political risk on bank performance depends on the performance proxies. Specifically, political risk was found to be negatively related to banks’ returns on invested capital and positively related to deteriorating credit risk. Hence, it can be concluded that political risk induces poor banking system performance in Nigeria. The study provides a critical insight into the management of a country’s political systems in terms of their potential to create unfavorable conditions for banking systems to thrive.

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Restructuring and Bank Performance in Dual Banking System

Signifikan Jurnal Ilmu Ekonomi ◽

10.15408/sjie.v10i2.20740 ◽

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.

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Socio-Economic Effects of Customer Knowledge, Political Support, and Innovation on the Growth of Islamic Banking System; Case Study of Pakistan

10.21203/rs.3.rs-311357/v1 ◽

2021 ◽

Author(s):

Maira Abrar ◽

Shehla Jabeen ◽

sohail Abbas

Keyword(s):

Banking System ◽

Economic Effects ◽

Political Support ◽

Islamic Banking ◽

Public And Private ◽

Customer Knowledge ◽

Islamic Bank ◽

The Social ◽

National Bank ◽

Private Associations

Abstract Islamic banking is the most rising component in the economy for reasonable advancement of Pakistan tributary yet. Despite what might be expected, real impediments that interfere with the developments in Islamic money keeping are client information, political help, and advancement. The Islamic banking and money related segments proceed to develop, and ways incorporates the necessity to make new products. It isn't generally the absence of venture substitutes that urge associations to propose organized items. The examination incorporated the specimen of 100 individuals. Stratified-arbitrary testing method is utilized to deal with both public and private associations workers. A measurable tool named SPSS was utilized to separate the outcome which demonstrates that effect of customer knowledge, political support, and innovative advancement in development of Islamic money keep that might be conclusive. The reasonable advancement has three parts satisfaction incorporated the social equity, monetary soundness, and ecological trustworthiness by development of Islamic banking. It is inferred that Islamic bank could be worldview phenomenon in making the credit. However, national bank should make the product which can viably upgrade Islamic Banking. There is a strong microeconomics ground of Islamic financing for the economy wide conduct of good monetary issues and issues including the procedure structure. Islamic bank clients limit the dangers related with premium based obligation financing, and simple credit, which tormented regular banks amid the sub-prime home loan emergency. Conclusively, general monetary development of Islamic banking in Muslim nations will drive development of Islamic money related administrations, prompting further in Sharia-consistent system.

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