scholarly journals Islamic Banks: History, Stability and Lessons from Cooperative Banking

2021 ◽  
Vol 13 (3) ◽  
pp. 1-26
Author(s):  
Rosana Gulzar ◽  
Mansor H. Ibrahim ◽  
Mohamed Ariff
Keyword(s):  
Theoretical Model ◽  
Commercial Banks ◽  
Financial Stability ◽  
Fast Growth ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Banking Reform ◽  
History Of ◽  
Conventional Banks ◽  
Early Islamic

Islamic banking’s profit-maximising fervour, building upon the use of interest-resembling products, has raised concerns about its Shariah authenticity and financial stability. While early Islamic economists envisioned an industry built on values of mutuality and participation, architects of Islamic banking have chosen to replicate interest-based conventional banking for the purpose of fast growth. This study has two objectives. First, to narrate the history of Islamic banking, from the theories postulated to the beginnings of the industry. This builds an understanding of why ‘Islamic’ banking operates as it does currently, which has implications for Shariah compliance and financial stability. It is suggested that the mimicking of conventional banks may cause instability since unlike commercial banks, ‘Islamic’ banks face Shariah constraints. This leads to the second objective, which is to analyse the cooperative banking model, which has been described as the closest theoretical model to Islamic banking. Specifically, this study focuses on the model in Europe which, despite its challenges, has managed to silence critics in the way it contributes to communal welfare and financial stability, especially during credit crunches when commercial banks are known to retreat from markets. This first study of a functioning cooperative banking model, in the context of Islamic banking, may thus offer lessons for Islamic banking reform.

scholarly journals Perkembangan Bank Syariah Di Indonesia: Sebuah Kajian Historis

2019 ◽  
Vol 4 (1) ◽  
Author(s):  
M. Dliyaul Muflihin
Keyword(s):  
Commercial Banks ◽  
Profit Sharing ◽  
The State ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Conventional System ◽  
Business Units ◽  
History Of Development ◽  
History Of ◽  
Conventional Banks

Banking in Indonesia is now increasingly enlivened by the existence of Islamic banks, which offer financial and investment products in different ways than conventional banks that have long existed. Even conventional banks in Indonesia are now following the trend by establishing their own Islamic institutions or Islamic business units. Recorded in 2012 Islamic banks have increased rapidly to become 11 Islamic Commercial Banks (BUS) and 24 Sharia Business Units (UUS). Islamic banks were born and developed in Indonesia starting from the birth of Bank Muamalat in 1992. Law Number 7 of 1992 concerning banking was born because in that year Bank Muamalah was the only bank that carried out business activities based on the principle of profit sharing. Furthermore, the culmination point has been reached with the enactment of Law Number 10 of 1998 concerning banking which opens the opportunity for anyone who will establish a Shari'ah bank or who wants to convert from a conventional system to a sharia system. Until the issuance of Law No.10 of 1998. Furthermore, Law No.10 of 1998 was amended by Law No. 21 of 2008 concerning Islamic banking because on June 17 2008 the Law on Islamic Banking was adopted which promulgated in the State Gazette on July 16 2008. Keywords: History of Development, Islamic Banking, Indonesia

scholarly journals EVALUATION OF DUAL BANKING SYSTEM IN BANKING IN INDONESIA

2020 ◽  
Vol 11 (2) ◽  
Author(s):  
Amanatun Nisfah Nurun Nikmah ◽  
Tulus Suryanto ◽  
Surono Surono
Keyword(s):  
Financial Stability ◽  
Banking System ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Common Goal ◽  
The Face ◽  
Capital Access ◽  
Conventional Banks ◽  
Banking Institution ◽  
Negative Factors

Evaluation of Dual Banking System in Indonesia. Dual Banking System is the application of two banking systems in one banking institution, namely conventional banking and Islamic banking. Indonesia can optimize the dual banking system through strength share and weakness cover, namely Islamic banks are generally superior in terms of a more stable system in the face of market changes but have deficiencies in infrastructure, whereas conventional banks have large market and capital access and more infrastructure complete, but very vulnerable to crises due to the negative factors of economic integration which are already very strong. The superiority of the dual banking system concept is seen in two separate systems that operationally do not affect each other, but have one common goal, namely financial stability that supports economic growth. So, to achieve this goal the two systems can work together in external factors such as access to capital, infrastructure, supervision or clearing systems that can help interbank liquidity.

scholarly journals BANK RUN AND STABILITY OF ISLAMIC BANKING IN INDONESIA

2017 ◽  
Vol 3 (1) ◽  
pp. 25-60 ◽  
Author(s):  
Rahmatina A. Kasri ◽  
Tika Arundina ◽  
Kenny D. Indraswari ◽  
M. Budi Prasetyo
Keyword(s):  
Factor Analysis ◽  
Financial Stability ◽  
Banking System ◽  
Bank Runs ◽  
Primary Data ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Bank Run ◽  
Banking Stability ◽  
Conventional Banks

Bank run is an important economic phenomenon which increasingly occurred in in modern banking system and potentially threatened banking stability as it could trigger a banking crisis. However, most studies related to bank run focus on the occurrence of bank run in conventional banking system. Very few of them discuss the bank run phenomenon under Islamic banking system or dual banking system where Islamic banks jointly operating with conventional banks. Therefore, this study attempts to analyze the determinants of bank run in the Indonesian Islamic banking industry by employing primary data from 256 customers of Indonesia Islamic banks in 2015 and by utilizing factor analysis and descriptive statistics. In theory, Islamic banks tend to be more resilient towards any macroeconomic or financial shocks as compared to conventional banks due to the nature of its asset-based and risk-sharing arrangement. However, the result exhibits that both psychological and fundamental factors (i.e. macroeconomics and bank fundamentals) strongly influence the behaviors of Islamic banking depositors to withdraw their funds, which might trigger the occurrence of bank runs in the country. Insider information, macroeconomic condition and bank fundamental factors are also shown to have the highest impacts among all variables. Hence, in the context of banking stability, the finding implies that Islamic banks are not completely immune to the impacts of macroeconomic shocks or financial crisis. As a country with a dual banking system, Indonesia had experienced several bank runs since 1990s. Therefore, the findings of the study should provide the policy makers important insight into research based-policy in order to attain financial stability as one of the main economic goals of the country.Keywords: Bank run, Islamic bank, Factor analysis, IndonesiaJEL Classification: C83, G21, G28

scholarly journals DOES ISLAMIC BANKING PROMOTE FINANCIAL STABILITY? EVIDENCE FROM AN AGENT-BASED MODEL

2021 ◽  
Vol 7 (2) ◽  
pp. 201-232
Author(s):  
Omer Faruk Tekdogan ◽  
Burak Sencer Atasoy
Keyword(s):  
Financial Stability ◽  
The Other ◽  
Islamic Banking ◽  
Bank Failures ◽  
Islamic Banks ◽  
Financial Industry ◽  
Financial Systems ◽  
Agent Based ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

Islamic banking has come to the forefront as being one of the fastest growing branch of the global financial industry in recent years. In this study we evaluate whether coexistence of Islamic and conventional banks promote financial stability. In this respect, we evaluate two types of financial systems: (1) A system solely comprised of conventional banks, (2) a dual system in which conventional and Islamic banks coexist and interact with each other. Accordingly, we design two agent-based models representing aforementioned systems and examine possible contagious effects and causes of bank failures by employing the volatility spillover methodology. We find that Islamic banks greatly promote stability by providing liquidity during financial shocks and create more liquidity per asset compared to conventional banks. We also find that they tend to hold more cash than conventional banks, which cushion the effects of a possible liquidity squeeze. Conventional banks, on the other hand, tend to have reserve deficits, which intensify during shock periods. We conclude that coexistence of both bank types creates a win-win situation and contributes to financial stability.

Market-power, stability and risk-taking: an analysis surrounding the riba-free banking

2019 ◽  
Vol 18 (1) ◽  
pp. 2-24 ◽  
Author(s):  
Awatef Louhichi ◽  
Salma Louati ◽  
Younes Boujelbene
Keyword(s):  
Market Power ◽  
Financial Stability ◽  
Banking Sector ◽  
System Analysis ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Policy Debate ◽  
Method Of Moment ◽  
Content Type ◽  
Conventional Banks

Purpose Analysis of the trade-off between competition and financial stability has been at the center of academic and policy debate for over two decades and especially since the 2007-2008 global financial crises. This study aims to provide particular attention to the Islamic banking system which principally involves with the riba-free instruments as compared to the conventional interest-based system. The results show that an increase in the concentration in the conventional banking sector can lead to the deterioration of stability through the increased prices. For Islamic banks, an increase of the market power can positively affect the banking stability. Design/methodology/approach Two complementary approaches, namely, one-step generalized method of moment (GMM) system analysis and panel vector autoregressive (PVAR) framework, were applied. Findings The results show the same effect of Islamic and conventional banks’ market power on banking soundness; yet, a different effect is displayed with non-performing loans (NPLs). In particular, the “competition–fragility” assumption for both banking industries is supported when considering z-score as the dependent variable. Including NPLs, this postulation is still approved for conventional banks; however, the “competition–stability” postulation is supported for Islamic banks. Originality/value The existent literature was scarcely interested in exploring the concept of competitivity in the context of Islamic banking sector as compared to the conventional one by applying two complementary approaches, namely, GMM and PVAR. This later allows to test the effect and the feedback effect of the competition and stability concepts.

scholarly journals Credit Management in Full-Fledged Islamic Bank and Islamic Banking Window: Towards Achieving Maqasid Al-Shariah

2020 ◽  
Vol 11 (3) ◽  
pp. 92
Author(s):  
Najihah Muhammad ◽  
Sharifah Faigah Syed Alwi ◽  
Nabihah Muhammad
Keyword(s):  
Commercial Banks ◽  
Qualitative Methodology ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Structured Interviews ◽  
Credit Management ◽  
Islamic Bank ◽  
Management Procedures ◽  
Management Plans ◽  
Conventional Banks

The percentage of non-performing loans (NPL) and non-performance financing (NPF) in Malaysia commercial banks is under control and does not increase in its percentage since the year 2014 to 2016. These scenarios are the result of the stringent credit management procedures in the commercial banks which if not properly followed could affect banks’ profitability and liquidity. However, there are critics by the public on how Islamic banks normally tend to punish their customers who are the real traders or businessman without fixed monthly income when they slightly late in paying their periodical payment for the bank’s facility or financing. Islamic bank is supposed to help the customer in order for it to achieve maqasid al-Shariah (objectives of Shariah). Thus, this study intends to compare the credit management’s procedure in one of the full-fledged Islamic banks and one of the conventional banks which also offer Islamic banking window. This study also aims to identify the achievement of maqasid al-Shariah through the procedures of credit management in the two banks. This study adopted the qualitative methodology where semi-structured interviews are conducted with 2 bankers from one of the full-fledged Islamic banks and one of the conventional banks which also offer Islamic banking window. Results from this study indicated that each banks has their own strategies and procedures with regard to credit management. Their credit management plans were structured to help customers to secure their loans, financing and assets as well as protecting them from bankruptcy and insolvency which basically comply with maqasid al-Shariah. From this study, it is recommended for commercial banks to apply a strict approval process for loan and financing as well as a strict credit monitoring system to avoid NPL and NPF.

scholarly journals IMPLEMENTING A SPIRITUAL LEADERSHIP: MORNING PRAYING LEADERSHIP

2019 ◽  
Vol 3 (02) ◽  
Author(s):  
Iqbal Robbie
Keyword(s):  
Leadership Style ◽  
Financial Institution ◽  
Spiritual Leadership ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Banking Services ◽  
History Of ◽  
High Integrity ◽  
Development Phases ◽  
Conventional Banks

Sharia Credit Banks are alternative financial financing for communities other than conventional banks and other Islamic banks. BPRS Daya Artha Mentari carries out the mandate as a financial institution to serve the needs of the community in Islamic banking practices. These noble mandates and ideals are related to elements of philosophy, goals, processes and human resources that require the presence and need of leaders who have the ability, competence and high integrity to reach their ideal goals and expected goals. Based on his profile, the leadership in this bank has been proven by achieving success in delivering the bank as one of the banks that is leading the way in serving banking services in East Java. To strengthen the uniqueness of the research on leadership style in BPRS Daya Artha Mentari, it is necessary to state the description of the history of bank development and the accompanying leadership dynamics since its establishment in 1999. The history is divided into three development phases, namely the pioneering phase, the integration phase and the innovation phase. The results of this study can also be one of the models of leadership style in financial institutions and provide theorytical contributions to the development of science related to Human Resource Management, especially leadership style that is applied by the leaders of the sharia rural bank.

scholarly journals Comparison Of Good Corporate Governance(GCG) Implementation Practices In Islamic Commercial Banks In Indonesia

2021 ◽  
Vol 4 (2) ◽  
pp. 25-32
Author(s):  
Hendra Eka Saputra ◽  
Zul Ihsan
Keyword(s):  
Corporate Governance ◽  
Monitoring System ◽  
Commercial Banks ◽  
Research Method ◽  
Descriptive Analysis ◽  
Supervisory Board ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Good Corporate Governance ◽  
Conventional Banks

Sharia Banking in Indonesia has a Sharia Supervisory Board that can monitor the operation of Sharia banks so that they are different from other banks. It is hoped that with this monitoring system the operation of corporate governance will be better. This study aims to explain the differences in the application of Good Corporate Governance (GCG) between Islamic banking in Indonesia. Sharia Bank is a bank whose application is different from conventional banks. Where one of the differences is the existence of a Sharia Supervisory Board which ensures bank activities are based on sharia. Then conducted a study of Islamic banks during 2014 to 2018. This research method uses descriptive analysis based on data that has been reported by each Islamic banking. The results of the survey showed that BCA Syariah and BSM received the highest rating among other sharia banks. This explanation shows that the implementation of corporate governance has been "very good" and has been in accordance with the stipulated provisions. BNIS, BRIS, Bukopin Syariah Bank, Mega Syariah Bank, Panin Syariah Bank, Victoria Syariah Bank, and Maybank Syariah, each ranked 2 (two). This means that the implementation of corporate governance goes "well". Interestingly, the Muamalat bank which has been the oldest BUS in Indonesia is ranked 3 (three). This means that the application of corporate governance is "good enough". Some notes on Muamalat's bank that must be corrected.

scholarly journals Analisis Tingkat Pemahaman KPR Syariah pada Bank Syariah di Indonesia: Studi Pendahuluan

2014 ◽  
Vol 5 (2) ◽  
pp. 519 ◽  
Author(s):  
Mohamad Heykal
Keyword(s):  
Literature Review ◽  
20Th Century ◽  
Market Share ◽  
Commercial Banks ◽  
Secondary Data ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Business Units ◽  
Conventional Banks ◽  
Total Market

Sharia banking has been growing in many countries since the birth of post-neo revivalist movement in the mid-20th century. The development of Indonesian sharia banking began with a workshop related with interests and banking held by MUI in Cisarua on 18th to 20th of August 1990. Since 1992 to 2013 it has been established 11 sharia commercial banks and 24 sharia conventional banks that open sharia business units and 156 Islamic Financing Bank. In terms of existing office, Islamic banks in Indonesia have reached 1737 bank offices and also Islamic bank units. Moreover, the market share of Islamic banking has almost reached 5% of the total market share banking in Indonesia. Islamic banking also has a mortgage product that is essentially different from the existing mortgage in the conventional banking. It is expected that the Islamic mortgage product will result a profit. The product is a product released for customers who require financing from Islamicbank to have a house. This early study used literature review method and secondary data. This study built an analysis of the mortgage program issued by Islamic banks in Indonesia. Research concludes that the notion of Islamic banking on mortgage product, especially Islamic financing mortgage, from the internal party has not well distributed yet.

scholarly journals KETERTARIKAN NASABAH BANK KONVENSIONAL MELAKUKAN TAKE OVER KE BANK SYARIAH

2019 ◽  
Vol 1 (1) ◽  
pp. 29-50
Author(s):  
Juliana Juliana ◽  
Ismaulina Ismaulina ◽  
Melur Salsazila
Keyword(s):  
Qualitative Research ◽  
Data Collection ◽  
Financial Services ◽  
Commercial Banks ◽  
Research Method ◽  
Islamic Banking ◽  
Islamic Banks ◽  
The Public ◽  
Administrative Costs ◽  
Conventional Banks

With the development of Sharia Commercial Banks in Indonesia, it has become a customer solution in conducting economic transactions. Islamic Banks are institutions that provide financial services in accordance with sharia principles. Sharia Bank also provides Take Over services as a solution for customers in transferring debts from Conventional Banks to Sharia Banks. The purpose of this study is to determine the implementation of Take over and to find out why customers are interested in taking over from Conventional Banks to Islamic Banking in Lhokseumawe City. The research method used is a qualitative research method in order to obtain clear and definite data. Data collection techniques used in this study were interviews and documentation. The results showed that: (1) The contracts used in Sharia Banking in Lhokseumawe City are hiwalah, murabahah and qardh contracts. Implementation and application determined by Sharia Banking in Lhokseumawe City includes several stages, namely: The customer submits a financing application file in Sharia Banking, the customer confirms the remaining credit at the original Bank, after signing all application documents, the financial officer and the customer bring cash to the bank that payment is made, the customer has been transferred to Islamic Banking in Lhokseumawe City after signing a financing agreement and submitting a guarantee legality. (2) The reason the customer switches to a Sharia bank in Lhokseumawe City is because the customer wants financing based on the sharia system, is easily accessible to the public, the process is fast, administrative costs and insurance are cheaper, so that the customer is interested in switching to Sharia Banking in Lhokseumawe City with a murabahah financing contract. Keywords: Take over, Bank Konvesional dan Bank Syariah   Abstrak Dengan perkembangan Bank Umum Syariah di Indonesia, telah menjadi solusi pelanggan dalam melakukan transaksi ekonomi. Bank Syariah adalah lembaga yang menyediakan jasa keuangan sesuai dengan prinsip syariah. Bank Syariah juga menyediakan layanan Take Over sebagai solusi bagi pelanggan dalam mentransfer hutang dari Bank Konvensional ke Bank Syariah. Tujuan dari penelitian ini adalah untuk menentukan implementasi Take over dan untuk mengetahui mengapa pelanggan tertarik untuk mengambil alih dari Bank Konvensional ke Perbankan Syariah di Kota Lhokseumawe. Metode penelitian yang digunakan adalah metode penelitian kualitatif dalam rangka memperoleh data yang jelas dan pasti. Teknik pengumpulan data yang digunakan dalam penelitian ini adalah wawancara dan dokumentasi. Hasil penelitian menunjukkan bahwa: (1) Kontrak yang digunakan dalam Perbankan Syariah di Kota Lhokseumawe adalah kontrak hiwalah, murabahah dan qardh. Implementasi dan aplikasi yang ditentukan oleh Perbankan Syariah di Kota Lhokseumawe mencakup beberapa tahap, yaitu: Pelanggan mengajukan file aplikasi pembiayaan di Perbankan Syariah, pelanggan mengkonfirmasi sisa kredit di Bank asli, setelah menandatangani semua dokumen aplikasi, petugas keuangan dan pelanggan membawa uang tunai ke bank bahwa pembayaran dilakukan, pelanggan telah ditransfer ke Perbankan Syariah di Kota Lhokseumawe setelah menandatangani perjanjian pembiayaan dan mengajukan legalitas jaminan. (2) Alasan pelanggan beralih ke bank Syariah di Kota Lhokseumawe adalah karena pelanggan menginginkan pembiayaan berdasarkan sistem syariah, mudah diakses oleh publik, prosesnya cepat, biaya administrasi dan asuransi lebih murah, sehingga pelanggan tertarik untuk beralih ke Perbankan Syariah di Kota Lhokseumawe dengan kontrak pembiayaan murabahah. Kata kunci: Take Over, Konvesional Bank dan Bank Syariah.

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