How money laundering (ML) affects the loan portfolio quality of Islamic banks?
Journal of Money Laundering Control
ISSN: 1368-5201
Article publication date: 20 April 2022
Issue publication date: 2 March 2023
Abstract
Purpose
This research aims to examine the impact of money laundering (ML) and corruption on the asset quality of conventional and Islamic banks.
Design/methodology/approach
The current study used the data of conventional and Islamic banks of Pakistan from 2012 to 2018. In this study, we used fully modified ordinary least squares, dynamic ordinary least squares and pooled ordinary least square methods to analyze the data.
Findings
The results found that corruption and ML positively affect the conventional banking non-performing loans (NPLs). In contrast, corruption and ML harm the Islamic bank’s loan portfolio quality.
Originality/value
To the best of the authors’ knowledge, the relationship between corruption, ML and NPLs in conventional and Islamic banks of Pakistan are examined for the first time.
Practical Implications
According to the study’s findings, bank authorities should establish an effective method for monitoring loan activities and developing new and innovative products in Islamic banks. Additionally, the Pakistani government needs to improve anti-corruption and anti-ML policies to earn investors’ trust.
Keywords
Citation
Shah, I.H., Aish, K. and Kashif, I. (2023), "How money laundering (ML) affects the loan portfolio quality of Islamic banks?", Journal of Money Laundering Control, Vol. 26 No. 2, pp. 309-323. https://doi.org/10.1108/JMLC-11-2021-0130
Publisher
:Emerald Publishing Limited
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