scholarly journals Selection Criteria for Conventional and Islamic Banks: An Empirical Analysis

2021 ◽  
Vol 8 (1) ◽  
pp. 38-60
Author(s):  
Atiq uz Zafar ◽  
Malik Muhammad ◽  
Bibi Akhtar
Keyword(s):  
Selection Criteria ◽  
The Other ◽  
Islamic Banks ◽  
Customer Preferences ◽  
Factors Influencing ◽  
Five Factors ◽  
Conventional Banks ◽  
Quick Service ◽  
Selection Of ◽  
Conventional And Islamic Banks

The current study investigates the bank selection criteria used by the customers of both the conventional and Islamic banks of Pakistan. From six different cities, a sample of 1000 customers was selected in order to find out the factors influencing their selection of a bank. The results showed that “Security of Money” was considered as the most important factor in the selection of banks, both by the customers of conventional and Islamic banks. The results also revealed that the customers of Islamic banks ranked “Competence of Staff”, “Online Banking Facility”, and “Confidentiality of Information” as the second, third and fourth most important factors in the selection of their respective banks. On the other hand, the customers of conventional banks emphasized “Availability of ATM Machines”, “Quick Service”, and “Friendly Behavior of Staff” as the second, third and fourth most important factors in bank selection. Further, the customers of Islamic banks ranked “Shari’ah Compliance” as the seventh most important factor, while the customers of conventional banks ranked it as the twentieth important factor out of the total twenty-five factors. Thus, to retain the existing customers and to attract new ones, both Islamic and conventional banks need to focus on customer preferences when offering their products.

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.

scholarly journals Life after Debt: The Effects of Overleveraging on Conventional and Islamic Banks

2020 ◽  
Vol 13 (6) ◽  
pp. 137
Author(s):  
Samar Issa
Keyword(s):  
Global Financial Crisis ◽  
The United States ◽  
The Other ◽  
Islamic Banks ◽  
Global Crisis ◽  
The United Kingdom ◽  
The Difference ◽  
Conventional Banks ◽  
The One ◽  
Conventional And Islamic Banks

It is generally argued that Islamic banks are safer than conventional banks. The prime reason is that their product structure is essentially asset-backed financing, while conventional banks rely heavily on leveraging, which was considered one of the main causes of the 2008 global financial crisis. This paper examines the riskiness of Islamic and conventional banks during the 2008 global crisis by measuring overleveraging, defined as the difference between actual and optimal debt. This research conducted empirical analysis on the overleveraging of 20 banks (10 conventional and 10 Islamic banks) from five different countries, namely, Bahrain, Kuwait, Malaysia, the United States, and the United Kingdom. The analysis is double-folded: on the one hand, the results in this paper suggest that excess debt, rather than the mere holding of debt, was the reason behind the severe financial meltdown in 2007–2009; on the other hand, this paper shows that Islamic banks, in most of the countries in context, performed better during the recent crisis, but were subject to the second-round effect of the global crisis around the years of 2011–2013.

Macroeconomic shocks, fragility and home financing in Malaysia: can rental index be the answer?

2018 ◽  
Vol 9 (1) ◽  
pp. 17-44 ◽  
Author(s):  
Rosylin Mohd Yusof ◽  
Farrell Hazsan Usman ◽  
Akhmad Affandi Mahfudz ◽  
Ahmad Suki Arif
Keyword(s):  
Interest Rates ◽  
Islamic Banks ◽  
Macroeconomic Shocks ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Rental Rate ◽  
Conventional Banks ◽  
The Impact ◽  
Conventional And Islamic Banks

Purpose This study aims to investigate the interactions among macroeconomic variable shocks, banking fragility and home financing provided by conventional and Islamic banks in Malaysia. Identifying the causes of financial instability and the effects of macroeconomic shocks can help to foil the onset of future financial turbulence. Design/methodology/approach The autoregressive distributed lag bound-testing cointegration approach, impulse response functions (IRFs) and forecast error variance decomposition are used in this study to unravel the long-run and short-run dynamics among the selected macroeconomic variables and amount of home financing offered by both conventional and Islamic banks. In addition, the study uses Granger causality tests to investigate the short-run causalities among the selected variables to further understand the impact of one macroeconomic shock to Islamic and conventional home financing. Findings This study provides evidence that macroeconomic shocks have different long-run and short-run effects on amount of home financing offered by conventional and Islamic banks. Both in the long run and short run, home financing provided by Islamic banks is more linked to real sector economy and thus is more stable as compared to home financing provided by conventional banks. The Granger causality test reveals that only gross domestic product (GDP), Kuala Lumpur Syariah Index (KLSI)/Kuala Lumpur Composite Index (KLCI) and house price index (HPI) are found to have a statistically significant causal relationship with home financing offered by both conventional and Islamic banks. Unlike the case of Islamic banks, conventional home financing is found to have a unidirectional causality with interest rates. Research limitations/implications This study has focused on analyzing the macroeconomic shocks on home financing. However, this study does not assess the impact of financial deregulation and enhanced information technology on amount of financing offered by both conventional and Islamic banks. In addition, it is not within the ambit of this present study to examine the effects of agency costs and information asymmetry. Practical implications The analysis of cointegration and IRFs exhibits that in the long run and short run, home financing provided by Islamic banks are more linked to real sector economy like GDP and House Prices (HPI) and therefore more resilient to economic vulnerabilities as compared to home financing provided by conventional banks. However, in the long run, both conventional and Islamic banks are more susceptible to fluctuations in interest rates. The results of the study suggest that monetary policy ramifications to improve banking fragility should focus on stabilizing interest rates or finding an alternative that is free from interest. Social implications Because interest plays a significant role in pricing of home loans, the potential of an alternative such as rental rate is therefore timely and worth the effort to investigate further. Therefore, Islamic banks can explore the possibility of pricing home financing based on rental rate as proposed in this study. Originality/value This paper examines the unresolved issues in Islamic home financing where Islamic banks still benchmark their products especially home financing, to interest rates in dual banking system such as in the case of Malaysia. To the best of the authors’ knowledge, studies conducted in this area are meager and therefore is imperative to be examined.

Financial Risk of Conventional and Islamic Banks: Does Institutional Quality Matter?

2021 ◽  
Vol 12 (3) ◽  
pp. 510-524
Author(s):  
Normaizatul Akma Saidi Et.al
Keyword(s):  
Credit Risk ◽  
Financial Risk ◽  
Liquidity Risk ◽  
Islamic Banks ◽  
Government Effectiveness ◽  
Regulatory Quality ◽  
Level Data ◽  
Conventional Banks ◽  
The Relationship ◽  
Conventional And Islamic Banks

Banks play a significant role in financing the economy and take on risky financial activities based on information and trust as they specialized companies with their own specificities. This study was propelled to unravel the determinants that affect financial risk (liquidity risk and credit risk) for conventional and Islamic banks. The bank-level data of conventional and Islamic banks in the regions of Middle East, Southeast Asia, and South Asia between 2006 and 2014 were collected from the Bankscope, which is a commercial database produced by the Bureau van Dijk. Thus, for conventional banks the obtained results exhibited significantly positive relationship between regulatory quality towards liquidity risk. Then, the relationship between regulatory quality towards credit risk was negatively significant for conventional banks. Meanwhile, as for Islamic banks, the relationship between government effectiveness and regulatory quality towards financial risk was insignificant. Hence, the regulators or policymakers are able to identify specific mechanism to improve the risk management of these banks as well through this study.

Does service quality increase the level of banks performance

2019 ◽  
Vol 38 (6) ◽  
pp. 442-454 ◽  
Author(s):  
Syed Faraz Ali ◽  
Muhammad Naeem
Keyword(s):  
Service Quality ◽  
Multiple Regression ◽  
Positive Impact ◽  
Quality Parameters ◽  
Cluster Sampling ◽  
Islamic Banks ◽  
Content Type ◽  
Banking Systems ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

Purpose The purpose of this paper is to unfold the relationship between service quality and level of performance of conventional and Islamic banks. Also, it intends to uncover what are the features of service quality which can raise the level of performance either in conventional banks or Islamic banks. There is rare literature available that focused on comparative study between above stated banking systems based on emerging parameters of SERVQUAL model. Design/methodology/approach To meet the objectives of this investigation, research data has been from 450 customers who have had accounts and dealings with conventional and Islamic banks in the previous five years. The customers are selected based on cluster sampling from regional offices of conventional and Islamic banks. Findings The collected data have been analyzed by using confirmatory factor analysis (CFA) technique followed by common method variance (CMV), multiple regression test and independent sample t-test used to examine the parameters of service quality in the context of banks performance. The purpose of CFA is to find the model validity, while multiple regression and t-test is performed in order to examine the influence of service quality parameters on banks performance. Originality/value The study used compliance as a one of the emerging and unique dimension of service quality. This dimension is rarely investigated in the context of measuring the level of bank performance of conventional and Islamic banking systems. Findings reveal responsiveness and assurance is the strongest predictor of conventional banking performance. Compliance and reliability has significant and positive impact on the level of performance of Islamic banks. Moreover, the study has practical implications for the top management and stakeholders of conventional and Islamic banks to increase the level of performance by using SERVQUAL model.

A Conjoint Analysis of Five Factors Influencing Heavy Vehicle Drivers Perceptions of Workload

1995 ◽  
Vol 39 (17) ◽  
pp. 1102-1106 ◽  
Author(s):  
Thomas E. Nygren
Keyword(s):  
Conjoint Analysis ◽  
The Other ◽  
Traffic Density ◽  
Heavy Vehicle ◽  
Comparison Analysis ◽  
Scaling Technique ◽  
Factors Influencing ◽  
Five Factors ◽  
Perceived Workload ◽  
Conjoint Scaling

Conjoint analysis, a multi-factor subjective scaling technique, was used in a study of heavy vehicle drivers to obtain a measure of their perceived workload demands under different driving conditions. These included combinations of low and high levels of traffic density, lighting, roadway type, visibility, and traction. A tradeoff comparison analysis was used to collect the conjoint scaling data from a subset of the complete 2−2−2−2−2 design. Results indicated that an additive factor representation fit the data very well, but that the five factors had very different importance weights. The drivers’ orderings of perceived demand appeared to be inversely related to their control over the conditions. The two most important factors (traction and visibility) are effectively environmental factors that cannot be easily controlled by the driver. The other three factors (traffic density, highway type, and lighting) can, at least to some extent, come under the control of the driver. Implications of these results and the use of conjoint scaling methodology are discussed.

Competitive conditions and market power of Islamic and conventional commercial banks

2014 ◽  
Vol 5 (1) ◽  
pp. 29-46 ◽  
Author(s):  
Hichem Hamza ◽  
Safa Kachtouli
Keyword(s):  
Southeast Asia ◽  
Market Power ◽  
Traditional Approach ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Lerner Index ◽  
Conventional Banks ◽  
Conventional And Islamic Banks ◽  
Concentration Ratios

Purpose – The expansion of the Islamic banking industry seems to accentuate the banking competition in MENA and Southeast Asia where conventional and Islamic banks coexist. In this context, the research aims\ to examine the competitive conditions and the market power of the conventional and Islamic banks during the period 2004-2009 in MENA and Southeast Asia region. Design/methodology/approach – The authors use a variety of structural and non-structural measures related to the traditional approach and the new empirical approach of the industrial organization. The methodology is based on set of measures of the competition and market power. The first measure is a set of concentration ratios (C3, C5) and Herfindahl-Hirschman index (HHI). The second measures are the Panzar and Ross H statistic and the Lerner index based on econometric estimations with the aim of evaluating the structure of market and measuring its power in terms of price setting. Findings – The results indicate that under the HHI index, both markets are low concentrated, while according to the concentration ratios, the Islamic market is considered as moderately concentrated. The estimations results, through the H-PR-statistic of Panzar and Ross related to degree of competition and the Lerner index of market power, indicate that both markets are characterized by a monopolistic competition and the Islamic banking expressed a high degree of market power. Research limitations/implications – The research focuses exclusively on the countries where the data are available and excludes the other countries where competition and market power might have different forms. Practical implications – In a competitive environment, each bank is required to analyze the structure of its market and competitive conditions, in order to develop a business strategy and effective action plans. In the context of the multiplication of the Islamic banks in the MENA and Southeast Asia, the enhancement of Islamic bank competitiveness by offering new products is determinant for their success. Originality/value – To the best of the authors' knowledge few studies have examined this subject in a comparative analysis between the Islamic and conventional banks. So the authors contribute to the literature on Islamic banking by considering a sample of Islamic and conventional banks operating in the same countries in order to examine the existence or not of difference between them.

scholarly journals How Efficient is the Islamic Banking Model in Pakistan?

2017 ◽  
Vol 6 (1) ◽  
pp. 111-125
Author(s):  
Tahseen Mohsan Khan ◽  
Mohsan Khan Rizwan ◽  
Saima Akhtar ◽  
Syed Waqar Azeem Naqvi
Keyword(s):  
Credit Risk ◽  
Asset Management ◽  
Capital Adequacy ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Return On Assets ◽  
Management Capability ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

The purpose of this study is to analyze the conventional and Islamic banking in Pakistan. For this study, a sample of 19 conventional banks and five Islamic banks was selected. The CAMEL approach is used to evaluate the performance of both conventional and Islamic banks. Ten ratios were used to measure profitability, liquidity and credit risk. Our findings suggest that Islamic banks are less efficient than conventional banks in asset management, management capability and liquidity. Conventional banks have better earning capability in terms of return on assets and overhead ratios. The analysis also shows that Islamic banks have better capital adequacy than conventional banks.

scholarly journals Islamic Banking Selection Criteria: Case in Indonesia Using Analytic Network Process

2019 ◽  
Vol 10 (1) ◽  
pp. 165
Author(s):  
Aam Slamet Rusydiana ◽  
Fatin Fadhilah Hasib
Keyword(s):  
Analytic Network Process ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Analytical Network Process ◽  
Network Process ◽  
Conventional Banks ◽  
Bank Marketing ◽  
And Behavior ◽  
Selection Of

<p>The Islamic banking industry is currently one of the main indicators of the development of Islamic economics in Indonesia. In Islamic banking issue, one of the important issues is related to people's preferences and behavior towards Islamic banks. The study of the criteria for selecting a bank has been the concern of many bank marketing researchers. Compared to conventional, such studies are relatively minimal, especially in Indonesia. This study tries to analyze the preferences and behavior of criteria for selection of Islamic banks in Indonesia through the Analytical Network Process (ANP) approach.The results conclude that the most priority criteria that influence the selection of Islamic banks in Indonesia are service factors and religiosity factors or the suitability of banks with sharia principles. Therefore, Islamic banks need to constantly improve the quality of services both services and products so that they can compete with conventional banks.</p><p>Industri perbankan syariah saat ini merupakan salah satu indikator utama perkembangan ekonomi Islam di Indonesia. Dalam masalah perbankan syariah, salah satu masalah penting adalah terkait dengan preferensi dan perilaku pemilihan masyarakat terhadap bank syariah. Studi tentang kriteria pemilihan bank syariah telah menjadi perhatian banyak peneliti. Studi tersebut relatif minimal jika dibandingkan dengan bank konvensional, terutama di Indonesia. Penelitian ini mencoba menganalisis preferensi dan perilaku pemilihan kriteria bank syariah di Indonesia melalui pendekatan Analytical Network Process (ANP). Hasilnya menyimpulkan bahwa kriteria yang paling prioritas yang mempengaruhi nasabah dalam memilih bank syariah di Indonesia adalah faktor layanan dan faktor religiusitas atau kesesuaian bank dengan prinsip syariah. Oleh karena itu, bank syariah perlu terus meningkatkan kualitas layanan baik produk maupun jasa sehingga mereka dapat bersaing dengan bank konvensional.</p>

scholarly journals Examining the Nexus between Riba and Gharar, and Islamic Banking Products Among Zanzibar People

2021 ◽  
pp. 27-34
Author(s):  
Hamad Mohammed Shkeily ◽  
Naziruddin Abdullah
Keyword(s):  
Hypothesis Test ◽  
Reliability And Validity ◽  
Income Level ◽  
The Other ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Islamic Bank ◽  
Other Hand ◽  
The People ◽  
Conventional Banks

This paper aims at examining the nexus between riba, gharar and income level, and Islamic Banking Products among Zanzibar people. The Islamic bank products such as Murabahah, Musharakah, Mudarabah, Ijarah, Hawalah, Takaful and Sukuk were considered as independent variables for this study. On the other hand, the dependent variables investigated were three (3) namely riba, gharar and income level. A total of 116 respondents consisting of Zanzibar people residing in different districts responded to the survey questionnaire via google form. The study used statistical techniques to analyse the collected data in terms of demographic, descriptive, reliability and validity analysis and presented by charts, tables and curves. The hypothesis test has been conducted using correlation analysis. Statistically, the finding revealed that, the people of Zanzibar were against Riba but in favour of Murabahah, Musharakah, Mudarabah, Ijarah, Hawalah, Takaful and Sukuk with p≤0.01. The result also revealed that the people of Zanzibar were against gharar with p≤0.01. On the other hand, income level showed a significant correlation against Mudarabah, Ijarah, Hawalal, Takaful and Sukuk as p≤0.01. These findings suggest that the products and services of Islamic banks have a significant relationship with Riba, Gharar and level of income for Islamic banks’ shariah priority. It is also shown that riba and gharar were significantly impacted the people of Zanzibar for the influence on the acquisition of Islamic bank facilities which are vital on direct effects that attract customers and investors in which they are customised from conventional banks products. As the awareness level from these Islamic products are high, it is recommended that Islamic banks should focus in designing Islamic banks products (Murabahah, Musharakah, Mudarabah, Ijarah, Hawalah, Takaful and Sukuk) that will comply with Shariah requirement.

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