scholarly journals Impact of Credit Risk Transfer Techniques on Lending Behavior of Conventional & Islamic Banks in Pakistan

2017 ◽  
Vol 4 (2) ◽  
pp. 12 ◽  
Author(s):  
Yusra Saeed ◽  
Huma Ayub
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Random Effect ◽  
Random Effect Model ◽  
Policy Implications ◽  
Islamic Banks ◽  
Risk Transfer ◽  
Management Techniques ◽  
Conventional Banks ◽  
The Impact

Application of risk management techniques gain significant importance after the financial crises of 2008. Banks adopt contemporary risk management techniques to eliminate credit risk associated with the enlargement of their lending volume. The present study aims to analyze the impact of credit derivatives on lending/financing behavior of conventional and Islamic banks of Pakistan. The study used comparative analysis by employing random effect model for the sample of 20 conventional banks and pooled OLS regression on sample size of 5 Islamic banks for the period of 2006-2016. Results of the study show that conventional banks effectively increase their lending volumes by utilizing risk transfer techniques. However, Islamic banks are still at its infancy in utilizing risk transfer techniques due to shariah restrictions. The study recommends policy implications for Islamic bank to introduce innovative shariah compliant hedging instruments to boost their financing portfolios.

scholarly journals Credit Management and Issues of Bad Debts: An Empirical Study of Listed Deposit Banks in Nigeria

2020 ◽  
pp. 32-49
Author(s):  
Peter E. Ayunku ◽  
Akwarandu Uzochukwu
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Random Effect ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Data Set ◽  
Credit Management ◽  
Loan Loss Provision ◽  
The Impact

This study examines the impact of credit management on firm performance amidst bad debts, among Nigerian deposit banks. Five hypotheses were formulated following the dependent variables of Return on Asset and Tobin Q. The independent variables employed for this study include: Loan Loss Provision, Loan to Deposit Ratio, Equity to Asset Ratio, and Loan Write off. This study is based on ex-post facto research design and employed a panel data set collected from fourteen (14) commercial banks over six years ranging from 2014 to 2019 financial year. We analyzed the data set using descriptive statistics, correlation and Ordinary Least Square Regression Technique. The random effect models established that non-performing loan, loan loss provision and equity to asset impact significantly on banks’ performance in both Return on Asset and Tobin-Q models. This suggests that the sampled banks need to establish efficient arrangements to deal with credit risk management. In all, credit risk management indicators considered in this research are important variables in explaining the profitability of Nigerian commercial banks. However, based on the outcome from the empirical analysis, the study carefully recommends that investors and shareholders in these banks should be aware of the possible use of provisions for losses on non-performing loans by managers for smoothening of profits. The shareholders specifically should be ready to meet optimal agency costs to reduce the manager's information asymmetry by hiring competent internal and external auditors.

COMPETITION-STABILITY RELATIONSHIP IN DUAL BANKING SYSTEMS: EVIDENCE FROM EFFICIENCY-ADJUSTED MARKET POWER

2021 ◽  
pp. 1-24
Author(s):  
MUDEER AHMED KHATTAK ◽  
OMAR ALAEDDIN ◽  
MOUTAZ ABOJEIB
Keyword(s):  
Market Power ◽  
Financial Stability ◽  
Banking Sector ◽  
Market Competition ◽  
Policy Implications ◽  
Islamic Banks ◽  
Banking Competition ◽  
Precise Measure ◽  
Conventional Banks ◽  
The Impact

This research attempts to explore the impact of banking competition on financial stability employing a more precise measure of market power. It was found that Islamic banks are less stable and are enjoying lower market power. The analysis shows that higher market competition makes the banking sector vulnerable to defaults, supporting the “competition-fragility view”. This research finds no difference in the relationship for Islamic banks indicates that Islamic banks might be involved in traditional banking activities as conventional banks. The results are consistent and robust to different estimation approaches and subsamples. This research carries regulatory and policy implications.

Risk and risk management practices

2020 ◽  
Vol 11 (8) ◽  
pp. 1555-1581 ◽  
Author(s):  
Adel Elgharbawy
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Management Practices ◽  
Archival Data ◽  
Islamic Banks ◽  
Monitoring And Control ◽  
Content Type ◽  
Different Types ◽  
Conventional Banks ◽  
And Control

Purpose This study aims to compare types and levels of risk and risk management practices (RMPs) including the recognition, identification, assessment, analysis, monitoring and control of risk in both Islamic and conventional banks. Design/methodology/approach A questionnaire survey was conducted among the Islamic and conventional banks in Qatar, together with an analysis of archival data extracted from the Thomson Reuters Eikon database for the period 2009-2018. Data were analysed using descriptive statistics, ANOVA and regression analysis. Findings Islamic banks encounter unique types and levels of risk that are not encountered by conventional banks. In Islamic banks, risks such as those of operation and Sharia non-compliance are perceived to be higher, while in conventional banks other risks such as those of credit and insolvency are higher; other risks, for example, liquidity risk, are faced by both. RMPs are determined by understanding risk and risk management, risk identification, risk monitoring and control and credit risk analysis, but not by risk assessment and analysis. However, the RMPs of the two types of bank are not significantly different, except in the analysis of credit risk. Research limitations/implications The study contributes to the debate in the literature by developing a better understanding of the dynamism of risk management in Qatari banks, which can be extended to similar contexts in the region. However, the relatively small sample size in only one country limits the possibility of generalizing the findings. The survey methodology is based on the perception of bankers rather than their actual actions and does not provide in-depth analysis for each type of risk, especially credit risk. However, using archival data, in addition to those from the survey, minimises the bias that would result from depending on one source of data. Practical implications The study provides valuable insights into the different types and levels of risk, as well as the RMPs in Islamic and conventional banks, which can help in guiding the future development and regulation of risk management in the banking sector of Qatar and its region. Originality/value The study helps to explain the mixed results of previous studies that compare types and levels of risk and RMPs in Islamic and conventional banks. Using different types of data and analysis, it provides evidence from one of the fastest growing economies in the world. It also addresses the concerns over RMPs in banks since the global financial crisis.

scholarly journals Islamic Versus Conventional Banks in Lebanon: An Empirical Study of Credit Risk Management

2018 ◽  
Vol 10 (8) ◽  
pp. 53
Author(s):  
Boutheina Hachem ◽  
Hiyam Sujud
Keyword(s):  
Risk Management ◽  
Empirical Study ◽  
Credit Risk ◽  
Risk Mitigation ◽  
Islamic Banks ◽  
Credit Risk Management ◽  
Credit Management ◽  
Management Processes ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

The aim of this research is to compare conventional and Islamic banks in various aspects of credit risk management processes. The study used 200 questionnaires, collected from 21 traditional banks and 4 Islamic banks in Lebanon. The results found that differences in the various issues of credit management between Islamic and conventional banks. Islamic banks are more understanding, aware, and cautious in their approach than traditional banks. Islamic banks are more efficient in assessing and analyzing credit risk than conventional banks. Lastly, Islamic banks are more used to credit risk mitigation than traditional banks.

scholarly journals The Impact of Macroeconomic Factors on Credit Risk in Conventional Banks and Islamic Banks: Evidence from Indonesia

2016 ◽  
Vol 7 (4) ◽  
Author(s):  
Huey-Yeh Lin ◽  
Nuraeni Hadiati Farhani ◽  
Meihua Koo
Keyword(s):  
Credit Risk ◽  
Islamic Banks ◽  
Macroeconomic Factors ◽  
Conventional Banks ◽  
The Impact

scholarly journals The Impact of Political Stability and Firm-Specific Variables on the Performance of Islamic Banks in Pakistan

2021 ◽  
Vol 58 (2) ◽  
pp. 1667-1672
Author(s):  
Ali Burhan Khan Et al.
Keyword(s):  
Random Effect ◽  
Random Effect Model ◽  
Political Stability ◽  
Financial Sector ◽  
Pivotal Role ◽  
Political Environment ◽  
Islamic Banks ◽  
Effect Model ◽  
Performance Determinants ◽  
The Impact

Financial sector of a country plays pivotal role in the economic advancement. Therefore, the aim of this study is to analyze the performance determinants of 5 Islamic banks in Pakistan which remain active from year 2006 to 2018. By applying the Random Effect Model (REM), this study concluded that leverage and size of Islamic banks contributed significantly towards their performance. However, Islamic banks’ performance remained unaffected with respect to change in political stability level and liquidity. Therefore, this study has implication for Islamic banks managers that instead of considering political environment of Pakistan, focus should be made on bank specific matters.

scholarly journals Implementation of Basel II and Profitability of Banks in Pakistan

2019 ◽  
Vol 1 (1) ◽  
pp. 24-34
Author(s):  
Muhammad Ramzan Sajid ◽  
◽  
Hassan Mujtaba Nawaz Saleem ◽  
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Regression Model ◽  
Commercial Banks ◽  
Random Effect ◽  
Liquidity Risk ◽  
Basel Ii ◽  
Annual Reports ◽  
Bank Profitability ◽  
The Impact

This study examines the impact of credit risk and liquidity risk on the profitability of the banks in Pakistan before and after the implementation of the Basel II policy in Pakistani Banks. For this purpose, five private commercial banks of Pakistan selected as the sample of our study. The balanced panel data of these banks for ten years (2006-2015) is used to analyze the model. The data is collected from the annual reports of the selected banks. The impact of pre and post-Basel-II policy implementation is also measured using four years (2006-2009) as pre-Basel-II and six years (2010-2015) as post-Basel-II to compare the impact of Basel-II implementation in the banks. The regression model estimation technique is used, which is selected based on the unit root test. The fixed effect and random effect models are used based on the Hausman test to estimate profitability determinants. The models are applied in three phases as the whole period, pre-Basel-II, and post-Basel-II implementation period. Further studies could be developed by adding more variables to the regression model to check their impact on bank profitability. The sample size can be increased to all commercial banks, and further, this study can also be discussed in Islamic banking and microfinance institutions. Further, the dependent variables could also be increased to enhance the results of bank profitability. The number of observations could be improved to describe the risk management more prudent than this. The study suggests that banks have to follow strategies that provide adequate diversification in credit risk and liquidity risk management to mitigate these risks and enhance the profitability. It is further recommended that adopting a sound risk management system and strong corporate governance will reduce the credit risk and liquidity risk and ultimately improve the profitability of banks in Pakistan.

scholarly journals Credit Risk, Islamic Contracts and Ownership Status: Evidence From Malaysian Islamic Banks

2020 ◽  
Vol 11 (3) ◽  
pp. 106
Author(s):  
Faridah Najuna Misman ◽  
Wahida Ahmad ◽  
Noor Sufiawati Khairani ◽  
Nur Hazimah Amran
Keyword(s):  
Credit Risk ◽  
Panel Data Analysis ◽  
Random Effect ◽  
Random Effect Model ◽  
Generalized Least Squares ◽  
Islamic Banks ◽  
Analysis Method ◽  
Ownership Status ◽  
Effect Model ◽  
Key Drivers

The paper attempts to model the key drivers of credit risk for Islamic banks in Malaysia. This paper is motivated to introduce Islamic financing types (IFT) and banks ownership status (STATUS) as additional factors in investigating the key drivers. This study also investigates the level of credit risk between the crisis and non-crisis period. This study employs a panel data analysis method using generalized least squares (GLS) regression for random effect model. The dependent variable is credit risk which assumed to be a function of bank-specific variables and other potential variables that are ownership status, Islamic financing types and financial crisis. The sample of this study comprised of 160 observations for 15 full-fledged Islamic banks in Malaysia, covering the period of 2000 to 2016. The finding suggests that financing expansion, financing and capital buffer are amongst important drivers that significantly influence the level of credit risk of Malaysian Islamic banks. The estimation results of this study also suggest that any Islamic bank that offers equity-based financing (EBF) has significantly higher credit risk.

scholarly journals Pengaruh Credit Risk Management Pada Financial Performance Bank Konvensional Yang Terdaftar di BEI

2021 ◽  
Vol 26 (3) ◽  
pp. 447
Author(s):  
Ervina, Vivi N. Fatimah, H.S.Lestari
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Secondary Data ◽  
Sampling Technique ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Capital Adequacy Ratio ◽  
Conventional Banks ◽  
The Impact

The purpose of this study is to analyze the impact of credit risk management on the financial performance of Indonesian conventional banks in 2016-2020. The sample in this study was 32 conventional banks from 160 observations using purposive sampling technique and secondary data. The dependent variable in this paper is measured by profitability using the return on assets proxy while credit risk management as an independent variable. From the research results, LDR and NPLR have no effect on financial performance. CAR has a positive influence on financial performance so that bank managers are expected to be able to maintain their capital adequacy ratio in accordance with the provisions set by Bank Indonesia to maintain their financial performance because a high capital adequacy ratio is considered safe and tends to meet its financial obligations, while CIR and LDR negative effect on financial performance. By increasing the ratio of costs to income indicates a low level of efficiency in banking operational costs, and low liquid assets will increase cash reserves to reduce liquidity risk. Investors can invest their funds in banks that have a high capital adequacy ratio, cost of income ratio and liquidity ratio to avoid financial risk.

scholarly journals MANAJEMEN RISIKO PADA BANK SYARIAH

2019 ◽  
Author(s):  
Afriyeni Afriyeni ◽  
Romi Susanto
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Liquidity Risk ◽  
Deep Understanding ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Legal Risk ◽  
The World ◽  
Banking Business ◽  
Conventional Banks

Research and experience over the last two decades has resulted in a deep understanding of issues relating to risk management and the principles of a well established risk faced by management. The company managers are increasingly recognizing the importance of risk management. In the context of risk management, the guidelines were implemented over the years, made only for conventional banks. Whereas players in the world and national banking business not only conventional banks, but has also been enlivened by banks with Islamic principles that number continues to increase from year to year. This paper gives an overview of how risk management in Islamic banking. In general, the risks faced by Islamic banking can be classified into two major parts. Ie the same risks faced by conventional banks and the risk that is unique because it must follow the principles of sharia. Credit risk, market risk, benchmark risk, operational risk, liquidity risk, and legal risk, Islamic banks must be faced. But, because they have to abide by the rules of Sharia, the risks faced by Islamic banks had to be different.

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