scholarly journals Ownership Structure, Bank Capital and Bank Lending/Financing Behaviour in a Dual Banking System

2019 ◽  
Vol 8 (5C) ◽  
pp. 233-237
Keyword(s):  
Financial Crisis ◽  
Ownership Structure ◽  
Risk Sharing ◽  
Banking System ◽  
Bank Lending ◽  
Islamic Banks ◽  
Bank Capital ◽  
Credit Supply ◽  
Conventional Banks ◽  
The Stability

Credit supply in the market is crucial in order to ensure sustainable real production can survive in the market as well as to strengthen economic activity. Therefore, it is not surprising that when the financial crisis occurred in 2008 to 2009, policymakers continued to use a variety of mechanisms such that banks could continue to maintain their credit supply. Nevertheless, risk sharing based on the business model that was adopted by Islamic banks displayed different behaviour from the conventional banks. Based on prior studies, the stability of financing growth by Islamic banks as compared to lending growth of conventional banks showed the model used by Islamic banks was more capable of effectively withstanding the financial crisis. Therefore, research into the quality of lending and financing is important to understand the growth of bank lending and financing behaviour in the market. Hence, the main objective of this study is to review the effect of ownership structure, bank capital and bank lending including financing behaviour in Islamic versus conventional banks. In addition, this study proposes a conceptual framework to further comprehend the decisions made in undertaking ownership structure, bank capital and lending in the dual banking system.

scholarly journals Impact of Basel Accord on Banking System (Evidence from Islamic Banks of Pakistan)

2015 ◽  
Vol 1 (2) ◽  
pp. 1
Author(s):  
Muhammad Mehtab Azeem ◽  
Akin Marsap ◽  
Cigdem Ozari
Keyword(s):  
Banking System ◽  
Islamic Banking ◽  
Basel Iii ◽  
Islamic Banks ◽  
Basel Accord ◽  
Trade Off ◽  
Financial Anomalies ◽  
Conventional Banks ◽  
The Stability ◽  
The Impact

Banks and bank regulatory authorities are vital players for the stability of economy and financial system in potential way. Basel III and its related to capital’s requirement obligations have been effective useful tool for the banking system. Since, this is tough job for the bankers to maintain the liquidity for hedging the future risk but it also been expensive for bankers to keep the extra capital and become more liquid since this discourage the provision of loans but promote the credit ratings. However, it has become necessary to investigate the impact of Basel III on Islamic banking system and analyze the trade off. The study analyzes empirically on the (Financial) anomalies in term of three factors (i) Financial size (ii) Spread and (iii) Provisions for non performing financing. The study also discusses the impact of Basel III on Islamic banking performance if applicable, in context of trade off and impact on country’s economy. We can ask that Basel III framework is difficult to be consistent for conventional banks; we can also realize that either new regulation will be flexible for Islamic banks under Basel III while Islamic and Conventional banks are totally different. Further, we shall estimate if the Basel III is more or less important in Islamic banks of Pakistan than conventional banks. At the end, we shall see from theoretical framework either the impact of Basel III is important for Islamic banks if and only if Islamic banks adopt to follow Basel III regulations and analyzing the potential influence on conventional banks.

scholarly journals PROCYCLICALITY AND BANK LENDING BEHAVIOR IN INDONESIA: THE CASE OF DUAL BANKING SYSTEM

2018 ◽  
Vol 4 (1) ◽  
pp. 23-38 ◽  
Author(s):  
Muhammad Rizky Prima Sakti ◽  
Mohamed Zulkhibri
Keyword(s):  
Business Cycle ◽  
Banking System ◽  
Bank Lending ◽  
Medium Size ◽  
Islamic Banks ◽  
Lending Channel ◽  
The Business Cycle ◽  
Financing Behavior ◽  
Conventional Banks ◽  
Lending Behavior

It is widely suggested in the literature that procyclicality of bank lending behavior may lead to financial instability. This study examines bank-lending channel over the business cycle for Indonesian dual banking system by ascertaining to what extent Islamic banks have a role in the credit smoothing. In this context, we utilize Indonesian dual banking system unbalanced panel data for the period 2001-2015. By employing two-step dynamic GMM estimators, the study shows that the bank lending behaviour are procyclical. However, when we categorize the lending behaviour into conventional and Islamic banks, the cyclicality of bank lending affects only for conventional banks. As for the Islamic banks, the business cycle does not affect their financing decision. Specifically, large Islamic banks are more counter-cyclical in their financing behavior than small and medium size Islamic banks. Robustness tests using different measures of loans and model specifications confirm the results that Islamic bank is more stable and less procyclical in the case of Indonesia banking system.

Islamic and Conventional Banks Stability during Global Financial Crisis: Evidence from Indonesia

2021 ◽  
Vol 12 (3) ◽  
pp. 2833-2840
Author(s):  
NunungAiniRahmah Et.al
Keyword(s):  
Regression Analysis ◽  
Financial Crisis ◽  
Sample Size ◽  
Global Financial Crisis ◽  
Market Concentration ◽  
Islamic Banks ◽  
Islamic Bank ◽  
Z Scores ◽  
Conventional Banks ◽  
The Stability

This study observes the stability of Islamic and conventional banks in Indonesia mainly during and post global financial crisisand their impact to the general financial stability.Bank stability measured by Z-scores, could be influenced by bank specifics, market concentration, and macroeconomic indicators.Pooled GLS regression analysis wereemployed to examine the Islamic and conventional banks stability. The sample size is 50 banks in Indonesia, consisting of 9 Islamic banks and 41 conventional banks between 2008 and 2017. The finding showed that the stability of the conventional bankslower than the Islamic bank. However,large Islamic banks are significantly less stable than the large conventional banks. Meanwhile, the small Islamic banks are significantly more stable than the small conventional banks. The finding of the study is expected to enhance the understanding of banks stability during and post global financial crisis in general, and within the context of Indonesia in particular.

scholarly journals The efficiency of Islamic banks versus conventional banks: an empirical study of an emerging economy

2019 ◽  
Vol 14 (2) ◽  
pp. 50-62 ◽  
Author(s):  
Hassan M. Hafez ◽  
Mona Halim
Keyword(s):  
Financial Crisis ◽  
Technical Efficiency ◽  
Informal Economy ◽  
Banking System ◽  
Financial Inclusion ◽  
Scale Efficiency ◽  
Data Envelopment Analysis Model ◽  
Islamic Banks ◽  
Analysis Model ◽  
Conventional Banks

The purpose of this study is to investigate the efficiency of two different banking systems operating in Egypt (Islamic versus conventional banks). A sample of 35 banks has been used to examine the technical efficiency before and after the financial crisis using data envelopment analysis model. Evaluating the technical efficiency of Egyptian banks will enable policymakers to support which banking system is more efficient to facilitate the financial inclusion and enhance the economic development.Before the financial crisis, conventional banks outperformed conventional banks with Islamic windows and Islamic banks, scale technical efficiency outperformed pure technical efficiency when analyzing conventional banks and conventional banks with Islamic windows. In terms of Islamic banks, pure efficiency outperformed scale efficiency. After the financial crisis, technical efficiency of all banks decreased. However, pure technical efficiency of Islamic banks has improved as a result of the quality of management and outperformed both conventional banks and conventional banks with Islamic windows. These results imply that Islamic banks have not been affected by the financial crisis. Therefore, the increased adoption and support of the Islamic banks in Egypt is addressed to develop the economy and push forward entrepreneurship projects, support the financial inclusion and the informal economy integration.

scholarly journals An Empirical Study into Comparing Conventional and Islamic Banks in the UAE

2020 ◽  
Vol 5 (2) ◽  
pp. 11-31
Author(s):  
Manoj Kapur
Keyword(s):  
Risk Sharing ◽  
Balance Sheet ◽  
Banking System ◽  
Jel Classification ◽  
Islamic Banks ◽  
Internal Factors ◽  
Financial Characteristics ◽  
Conventional Banks ◽  
Asset Quality ◽  
Conventional And Islamic Banks

Banking system constitutes the fundamental pillar of every economy. Banks acts financial intermediaries between sectors that have excess funds and those that are in deficit. Islamic banks operate under Sharia principles of risk sharing and interest prohibition as contrasted with conventional banks that buy capital to pool funds and sell capital to generate interest income or profit. This paper applies banks’ internal factors related to their balance sheet and income statement and using a total of 23 financial ratios pertaining to the internal factors, it attempts to compare and contrast between conventional and Islamic banks. This research explains the structure, operation and management of banks in the UAE coupled with the functioning of Islamic banks. The paper also aims to determine the profitable and efficient banks among the chosen sample. The sample includes 12 banks, equally distributed between Islamic and conventional banks using data between the periods of 2014 - 2018. The sample is broadly categorized based on profitability ratio, efficiency ratio, asset indicator ratio and risk ratios. Correlation and Regression analysis is used to determine a substantial ratio analysis between conventional and Islamic banks. Results from the study reveal indicators of financial characteristics such as profitability ratios, efficiency ratios, asset quality indicators and risk/ risk management ratios. The results clarify that Islamic banks are operationally efficient and profitable because of risks sharing and greater dependency on deposits capital. However, on an overall basis, the ratios indicate conventional banks have higher scores than their counterparts. JEL Classification Codes: F37.          

Risk, efficiency and capital in a dual banking industry: evidence from GCC banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohammad Alsharif
Keyword(s):  
Cost Efficiency ◽  
Risk Sharing ◽  
Banking Industry ◽  
Banking System ◽  
Least Square ◽  
Equation Modeling ◽  
Islamic Banks ◽  
Data Set ◽  
Content Type ◽  
Conventional Banks

PurposeThis study aims to extend the literature by simultaneously investigating the relationship between risk, efficiency and capital in the Gulf Cooperation Council (GCC) dual banking system.Design/methodology/approachThe study employs the simultaneous-equation modeling technique with a three-stage least square estimator on 60 listed GCC commercial banks from 2005 through 2018.FindingsAlthough GCC Islamic banks are more capitalized and liquid, they are riskier and less efficient than GCC conventional banks. Moreover, a higher level of capital reduces the insolvency and credit risk of GCC banks for both types of banks. However, it enhances the cost efficiency of GCC conventional banks only. GCC conventional banks also exhibit skimping behavior, while for GCC Islamic banks, cost efficiency is negatively associated with bank risk. This implies that the risk-taking behavior in Islamic banks is prompted by the incentives of the shareholders following the risk-sharing nature of Islamic banking.Originality/valueThis study differs from previous studies in many aspects. First, it relies on a recent long data set that covers the implementation of the accords of Basel II (introduced in 2004) and Basel III (introduced in 2010). Second, it estimates the efficiency of GCC banks based on separate frontiers for Islamic and conventional banks, ensuring the robustness of the results. In conclusion, to the best of the author's knowledge, this is the first study to investigate the intertemporal relationship between risk, efficiency and capital in the GCC dual banking industry.

Does Islamic banking really strengthen financial stability? Empirical evidence from Pakistan

2017 ◽  
Vol 10 (2) ◽  
pp. 130-148 ◽  
Author(s):  
Abdul Rashid ◽  
Saba Yousaf ◽  
Muhammad Khaleequzzaman
Keyword(s):  
Financial Stability ◽  
Banking System ◽  
Islamic Banks ◽  
Z Score ◽  
Content Type ◽  
Macroeconomic Indicators ◽  
Conventional Banks ◽  
The Stability ◽  
Underlying Variable ◽  
Empirical Framework

Purpose This paper aims to empirically assess the contribution of Islamic banks toward the financial stability of Pakistan. For this, the authors investigate the relative financial strength of Islamic banks and their contribution toward the financial stability. They also examine the relationship between the competitive conduct of banks and banking system stability. Design/methodology/approach The authors use quarterly data of ten conventional banks, four full-fledged Islamic banks and six standalone Islamic branches of conventional banks of Pakistan for the period 2006-2012. The z-score has been computed and used as the measure of stability of banks and the random effects estimator applied to quantify the impact of bank-specific variables and macroeconomic indicators on the financial stability. The empirical framework used in the paper enables the authors us to examine the differential effect of each underlying variable on the financial stability across Islamic and conventional banks. To check the robustness of the results, the authors have estimated several models with different specifications. Findings The regression results indicate that income diversity, profitability ratio, loan to asset ratio, asset size and the market concentration ratio of banks have significant effects on the stability of banks. Comparing Islamic and conventional banks, notable differential effects of the empirical determinants of financial stability for Islamic and conventional banks have been observed. The results suggest that Islamic banks have performed better as compared to conventional banks and contributed more effectively in the stability of financial sector. Overall, the results depict that the contribution of Islamic banks toward the financial stability has been reasonable and prospective. Practical implications The empirical results of the paper are very useful not only for banks’ managements but also for the investors, bank customers and policymakers. Specifically, the findings help in enhancing our understanding as to how the bank-specific variables and macroeconomic indicators are related to the financial stability of the banking system. The results also help understand the role of both Islamic and conventional banks in the financial stability. Further, the results suggest that the financial soundness can be enhanced by creating healthy competition in the banking industry. The results about macroeconomic indicators imply that protective measures are required to intensify (mitigate) the positive (negative) effect of gross domestic product (inflation) on banks’ financial stability. Originality/value This paper provides an overall comparative analysis of financial stability of both Islamic and conventional banks of Pakistan. First, the paper computes the z-score for each bank included in the sample, and then, it performs the regression analysis to study how bank-specific variables and macroeconomic factors are related to the financial stability of banks. Unlike the previous studies, our empirical framework enables the authors to examine the differential effect of each underlying variable on the financial stability across Islamic and conventional banks.

scholarly journals THE BANK LENDING CHANNEL OF MONETARY POLICY TRANSMISSION IN A DUAL BANKING SYSTEM

2017 ◽  
Vol 2 (2) ◽  
pp. 193-220
Author(s):  
Mansor H. Ibrahim
Keyword(s):  
Monetary Policy ◽  
Banking System ◽  
Bank Lending ◽  
Jel Classification ◽  
Islamic Banks ◽  
Bank Lending Channel ◽  
Data Set ◽  
Lending Channel ◽  
Conventional Banks ◽  
The Impact

This paper examines the impact of monetary policy on bank lending in a dual banking system, i.e. Malaysia. Making use of an unbalanced panel data set of 38 Islamic and conventional banks covering mostly 2001-2014, we find evidence that variations in monetary policy affect lending growth of Islamic banks and, to some extent, conventional banks. The results further reveal that, in conformity with studies using aggregate Islamic financing data, the Islamic financing growth reacts more strongly to monetary policy changes.  Moreover, we find no marked difference between full-fledged Islamic banks and Islamic bank subsidiaries in their responses to monetary policy. While we also document some evidence indicating the significant relations between bank-specific variables and lending growth, the bank-specific variables do not seem to have any role in impacting the potency of the bank lending channel.  Finally, we find that lending growth is directly related to economic growth, suggesting procyclicality of bank lending/financing in Malaysia. These results have important implications for effective implementation of monetary policy and further development of Islamic banks in Malaysia.    Key words:   Bank lending channel, Monetary policy, Dual banking system, Malaysia JEL Classification: E53, G21, C23

scholarly journals vulnerability of islamic banking

2017 ◽  
Vol 5 (2) ◽  
pp. 094
Author(s):  
Hasan Albanna
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Financial Crisis ◽  
Dynamic Behavior ◽  
Inflation Rate ◽  
Global Financial Crisis ◽  
Islamic Banks ◽  
Conventional Banks ◽  
The Stability ◽  
The Global Financial Crisis

The recent global financial crisis has renewed the focus on the resistance of Islamic banks in order to confront the crisis. While several empirical studies show that Islamic banks have no resist from the crisis. thus, Islamic banks run their business side by side with their counterpart and play the game under the same umbrella and the rules of game. In case of Indonesia, which implement dual banking system, Islamic banks have potential to be effected by the variables of conventional banks. Which mean, this condition led the Islamic banks have the vulnerable spot in economic life. This paper aim to examine the stability of Islamic banks and to discern dynamic behavior of Islamic banks to the macroeconomic variables such as GDP, inflation rate, exchange rate and interest rate. the measure of stability of Islamic banks formulated as z-score. Then, We use VAR/VECM analysis in order to see the dynamic behavior and the vulnerability of Islamic banks. the paper found several findings, first, during the global financial crisis, Islamic banks more stable than the conventional banks, while after the global financial crisis conventional banks tend to be more stable than Islamic banks. Second, From the IRF test display that Islamic banks react sensitively to the shock of interest rate. however, Islamic banks prohibit the practice of interest rate. even though, in practical reason, Islamic bank use interest rate as benchmarking to determine the price. This condition put the Islamic Banks in vulnerable condition. Third, the FEVD test showed that the stability of Islamic banks mostly contribute by its own stability then followed by GDP, interest rate, exchange rate and Inflation. At the seventh period the stability of Islamic banks mostly contribute by its stability then followed by Inflation rate, GDP, exchange rate and interest rate.

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