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1 – 10 of over 3000Peni Nugraheni and Istiqomah Nur Alimin
This study aims to examine the factors that influence profit–loss sharing (PLS) financing in Indonesian Islamic banks from the perspective of Islamic banks’ employees. Islamic…
Abstract
Purpose
This study aims to examine the factors that influence profit–loss sharing (PLS) financing in Indonesian Islamic banks from the perspective of Islamic banks’ employees. Islamic banks have important role in influencing the amount of PLS financing distribution through their screening process.
Design/methodology/approach
This study uses questionnaires in collecting data that are distributed to the employees who process or handle PLS financing in Islamic banks in Yogyakarta, Indonesia. The independent variables are risk, financing screening process, analysis of financial statement and competency of the employees of Islamic banks. The data are processed using multiple regression.
Findings
This study finds that risk, the quality of financing screening process and the analysis of financial statement have positive influence on the PLS financing, whereas competency of employees of Islamic banks does not influence PLS financing.
Practical implications
The results of this study are expected to give contribution to increase the role of Islamic banks in encouraging PLS financing. The adequate screening, controlling and monitoring system in Islamic banks should be strengthened to encourage the quality of financing distributed.
Originality/value
Primary data are used in this study to know the perspective of Islamic bank employees in the financing division on the PLS financing. This study attempts to identify the perspective of employees who have direct relationship with the decision of financing in Islamic banks.
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Ibrahim Musa Gani and Zakaria Bahari
Malaysia is one of the fastest-growing Asian economies with a properly designed and developed Islamic financial system. This unique feature of the Malaysian economy made it an…
Abstract
Purpose
Malaysia is one of the fastest-growing Asian economies with a properly designed and developed Islamic financial system. This unique feature of the Malaysian economy made it an important case study, and the purpose of this study is to assess for the dynamic contribution of Islamic finance to the growth of the real economy.
Design/methodology/approach
The study uses a quarterly data set of 20 years analysed via the autoregressive distributive lag bounds test approach to cointegration.
Findings
The results in the short-run show a non-significant relationship between Islamic banking indices and the real economy. However, in the long-run, financing and deposits of Islamic banks are favourable and contribute significantly to the growth of the Malaysian economy. There was an accumulation of meaningful and wide-ranging investment over the period of the study and productivity of capital was also extra-efficient. The direction of causality is found to be bidirectional between Islamic banking deposits and Malaysian gross domestic product (GDP), but there is a weak causal effect from Islamic banking financing to GDP.
Research limitations/implications
Malaysia has a dual financial system (conventional and Islamic) and both can affect its real economy. This research is limited to Islamic banking’s effects on Malaysian economic growth. The research also limits the scope and coverage for 20 years, from 1998 to 2017 to cover the years for which data is available for all the variables used in the study.
Practical implications
The results confirm that the Islamic banking sector in Malaysia is performing well in carrying out its major function of financial intermediation, which is the pooling and channelling of funds to productive investment activities. Consequently, the fact that Malaysia excels in Islamic finance is not a fluke. It is because of the effective performance of Islamic financial institutions in the country. Furthermore, Malaysian authorities are doing their level best in promoting Islamic financial activities.
Originality/value
The study fulfills the need to uncover the relationship between the Islamic financial system and the real economy in Malaysia. It differs from other studies as it uses the most recent available data, introduces new variables and identifies the channel by which Islamic banking development transmits growth.
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This study considers the case in which governments decide whether to support private commercial banks with a subsidy policy in order to encourage participation in the…
Abstract
This study considers the case in which governments decide whether to support private commercial banks with a subsidy policy in order to encourage participation in the international ship financing market. We examine two cases: (i) identical efficiency between domestic and foreign commercial banks; and (ii) different efficiencies between these banks. In the first case, the domestic government has the incentive to provide a subsidy strategy for domestic commercial banks to maximize social welfare, while the foreign government does not use the subsidy support. Furthermore, in the second case, foreign governments and commercial banks always prefer the subsidy strategy in order to maximize both social welfare and profits. However, the domestic government uses the subsidy strategy depending on the efficiency gap between the two banks. Our model suggests that governments need to support commercial banks with an appropriate subsidy strategy (direct or indirect) to promote participation in the market.
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This paper aims to examine the distributional differences of Islamic bank financing responses to financing rate across bank-specific characteristics in dual banking system. The…
Abstract
Purpose
This paper aims to examine the distributional differences of Islamic bank financing responses to financing rate across bank-specific characteristics in dual banking system. The study also aims to provide understanding of how efficiently Islamic banks perform their roles as suppliers of capital for businesses and entrepreneurs.
Design/methodology/approach
The study uses panel regression methodology covering all Islamic banks in Malaysia. The study estimates the benchmark model for Islamic bank financing with respect to bank characteristics and monetary policy.
Findings
The evidence suggests that bank-specific characteristics are important in determining Islamic financing behaviour. The Islamic financing behaviour is consistent with conventional lending behaviour that the Islamic bank financing operates depending on the level of bank size, liquidity and capital. There is no significant difference between Islamic bank financing and conventional bank lending behaviour with respect to changes in monetary policy.
Originality/value
Many problems and challenges relating to Islamic financing instruments, financial markets and regulations must be addressed and resolved. In practice, it would be a good idea if Islamic banks move away from developing debt-based instruments and concentrate more efforts to develop profit and loss sharing instruments.
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This paper aims to provide an economic rationale for Islamic finance.
Abstract
Purpose
This paper aims to provide an economic rationale for Islamic finance.
Design/methodology/approach
Its methodology is simple. It starts with listing the contributions to economic analysis relevant to the required rationale in the theories of banking, finance, price, money and macroeconomics, to identify the main rationale for Islamic finance. A concise description of the author’s model for an Islamic economic system, within which Islamic finance can be operational, is provided.
Findings
The paper finds distinct advantages of Islamic finance, when properly applied within the author’s model. Islamic finance can therefore be a candidate as a reform agenda for conventional finance. It opens the door for significant monetary reform in currently prevalent economic systems.
Research limitations/implications
The first limitation of the paper is that the distinct benefits of Islamic finance are all of macroeconomic types which are external to Islamic banking and finance institutions. They are therefore not expected to motivate such institutions to apply Islamic finance to the letter, without regulators interference to ensure strict application. The second limitation is the necessity to set up enabling institutional and regulatory arrangements for Islamic finance.
Originality/value
The results are unique as they challenge the received doctrine and provide non-religious rationale for Islamic finance.
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Adi Saifurrahman and Salina Kassim
The primary objective of this paper is to identify and compare the collateral imposition practices among Islamic banks in Indonesia to serve micro, small and medium-sized…
Abstract
Purpose
The primary objective of this paper is to identify and compare the collateral imposition practices among Islamic banks in Indonesia to serve micro, small and medium-sized enterprise (MSME) clients and explore the experiences and perceptions of MSME entrepreneurs pertaining to collateralisation in MSME financing.
Design/methodology/approach
This study was carried out by implementing a case study research strategy. The data was gathered primarily through the interview by utilising purposive uncontrolled quota sampling. The interview was conducted using semi-structured interview questions by targeting the two sides of Islamic financial inclusion: the Islamic banking industry (supply-side) and the MSME segment (demand-side).
Findings
This paper implies that the collateral provision is indeed an obligatory requirement for MSME to access regular financing in an Islamic bank, preferably the immovable type that consists of land and property. Subsequently, although the Islamic banks offer non-collateralised financing, their disbursement is still relatively scant and limited. Furthermore, despite the collateral issues, most MSME entrepreneurs positively perceive the bank’s collateralisation practice, indicating their awareness and understanding of the collateral purpose and function to access the financing facility.
Research limitations/implications
This paper merely observed six Islamic bank institutions and 22 MSME units in urban and rural areas in Indonesia using a case study approach. Therefore, the empirical findings and case discussions were limited to those around the corresponding Islamic banks and MSME participants.
Practical implications
By referring to the several disclosed issues associated with the collateral imposition practices, this paper presents several recommendations that might be considered by the policymakers and the Islamic banking industry to enhance the realisation of MSME Islamic financial inclusion from the collateral implementation aspect, and thereby, facilitating more inclusive growth for the MSME industry.
Originality/value
This paper is unique since the paper attempts to analyse and compare the collateral imposition practices and its perception from the two distinct sides of Islamic financial inclusion that were represented by Islamic banks and MSMEs in Indonesia by including different types of Islamic banks and different segments of MSME in their diverse business sector within the urban and rural locations.
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Khemaies Bougatef, Mohamed Sahbi Nakhli and Othman Mnari
The purpose of this paper is to investigate the relationship between Islamic banking and industrial production by decomposing Islamic financing (IF) into profit and loss sharing…
Abstract
Purpose
The purpose of this paper is to investigate the relationship between Islamic banking and industrial production by decomposing Islamic financing (IF) into profit and loss sharing (PLS) and non-profit and loss sharing (non-PLS) modes of financing.
Design/methodology/approach
This paper applies the autoregressive distributed lag (ARDL) approach and Toda and Yamamoto causality test on the monthly data set for Malaysia from 2010M1 to 2018M6.
Findings
The results reveal that IF plays an important role in boosting industrial production in the short run, as well as in the long run. Moreover, this positive effect mainly comes from non-PLS financing. In contrast, no significant relationship was found between PLS financing and industrial development neither in the short run nor in the long run.
Practical implications
The results have several policy implications. The existence of a time lag between the pooling of funds through PLS contracts and their channeling to industrial activities imply that Malaysian Islamic banks should maintain a long-term relationship with investment account holders. In addition, Islamic banks are called to increase the portion of PLS financing. The positive relationship between the industrial production index and IF (through non-PLS techniques) in the short and the long runs implies that policymakers in Malaysia should multiply their efforts to further expand the Islamic banking industry.
Originality/value
The originality of this study lies in decomposing Islamic banks’ financing into PLS financing (muḍārabah and mushārakah) and non-PLS financing to assess the contribution of each mode of financing in industrial development.
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Mohammed Ayoub Ledhem and Mohammed Mekidiche
The purpose of this paper is to investigate the link between the financial performance of Islamic finance and economic growth in all of Malaysia, Indonesia, Brunei, Turkey and…
Abstract
Purpose
The purpose of this paper is to investigate the link between the financial performance of Islamic finance and economic growth in all of Malaysia, Indonesia, Brunei, Turkey and Saudi Arabia within the endogenous growth model framework.
Design/methodology/approach
This study applied dynamic panel system GMM to estimate the impact of the financial performance of Islamic finance on economic growth using quarterly data (2014:1-2018:4). CAMELS system parameters were employed as variables of the financial performance of Islamic finance and gross domestic product (GDP) as a proxy of economic growth. The sample contained all Islamic banks working in the five countries.
Findings
The findings demonstrated that the only significant factor of the financial performance of Islamic finance, which affects the endogenous economic growth, is profitability through return on equity (ROE). The experimental findings also indicated the necessity of stimulating other financial performance factors of Islamic finance to achieve a significant contribution to economic growth.
Practical implications
The analysis in this paper would fill the literature gap by investigating the link between financial performance of Islamic finance and economic growth, as this study serves as a guide for the academians, researchers and decision-makers who want to achieve economic growth through stimulating Islamic finance in the banking sector. However, this study may well be extended to investigate the link between the financial performance of Islamic finance and economic growth over the Z-score model as another measure for the financial performance of Islamic finance.
Originality/value
This paper is the first that investigates the link between financial performance of Islamic finance and economic growth empirically using CAMELS parameters within the endogenous growth model to provide robust information about this link based on a sample of the top pioneer Islamic finance countries.
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Mohammad Mahbubi Ali and Rusni Hassan
Tawarruq (Islamic commodity financing) has evolved as the most ubiquitous concept in Malaysia’s Islamic banking industry. Nevertheless, the extensive use of tawarruq has invoked a…
Abstract
Purpose
Tawarruq (Islamic commodity financing) has evolved as the most ubiquitous concept in Malaysia’s Islamic banking industry. Nevertheless, the extensive use of tawarruq has invoked a number of Sharīʿah (Islamic law) concerns in its practice. This study aims to investigate the Sharīʿah non-compliant (SNC) phenomena in the practice of tawarruq financing in Malaysia.
Design/methodology/approach
This study adopts qualitative research methodology, combining both descriptive and content analysis. A self-administered questionnaire was distributed to 16 Malaysian Islamic commercial banks to unveil the Sharīʿah non-compliance issues in the application of tawarruq in Islamic banks (IBs) in Malaysia.
Findings
The study found that some practices of tawarruq in Malaysia might not comply with the Sharīʿah, mainly due to the improper sequencing of contracts. The study also discovered that IBs adopt different approaches in dealing with SNC events and the income derived therefrom. Finally, the study noted the influence of board of director/management on certain Sharīʿah decisions particularly on the treatment of non-ḥalāl (impermissible) income.
Practical implications
The findings of the study serve as a reference to industry players and regulators in formulating a Sharīʿah non-compliance risk management framework for tawarruq practices.
Originality/value
The survey on SNC issues in tawarruq practice constitutes the first of its kind in the existing literature.
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This research investigates the Islamic banks’ intermediation role (e.g. branches and deposits) in financing. It also examines how financing contributes to the regions' economic…
Abstract
Purpose
This research investigates the Islamic banks’ intermediation role (e.g. branches and deposits) in financing. It also examines how financing contributes to the regions' economic growth and poverty alleviation as a predictor and mediator variable.
Design/methodology/approach
A total of 297 observations were extracted from 33 Indonesian districts and 14 Islamic banks during the period 2012–2020. Fixed-effect regression analysis was used to examine variable’s interactions.
Findings
The empirical results indicate that Islamic banks have adopted a channelling role towards redistributing capital from lender to borrower. Besides, there are crucial roles in developing economies and reducing poverty at the district level. This study also reinforces the critical role of financing in mediating the relationship between branches and deposits as predictor variables and GDP and poverty as outcome variables.
Research limitations/implications
The current study was limited to Indonesian Islamic banks and the district’s perspective. Future research needs to cover sub-districts and other poverty measurements (e.g. human education and development perspectives), including conventional and Islamic banks. It can help practitioners, regulators and researchers observe the dynamic behaviour of the banking sector to understand its role in the economic and social fields.
Practical implications
Bank managers and regulators should promote branches, deposits and financing. It also enlightens people about the essential role of Islamic banks and their fundamental operations in business and economics.
Originality/value
This study contributes to economic literature, bank managers and local governments' decision-making processes by developing and testing an economic growth and poverty model.
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