Islamic Versus Conventional Banking: Characteristics and Stability Analysis of the Malaysian Banking Sector

Mohamad, Mohammad Taqiuddin; Hashim, Siti Aisyah

doi:10.1108/978-1-78756-283-720181013

Cited by 3 publications

(5 citation statements)

References 4 publications

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“…The rationale for this argument is that Islamic banks are still considered to lack risk management, which leads to more risk exposure in banking operations. On the other hand, as concluded by Mohamad et al (2018), conventional banks are more stable in their operations, particularly in managing bankruptcy risk, and can consequently contribute to stability of the financial system. In the long run, only CBFin_P has a negative and significant relationship with change in NPL.…”

Section: Resultsmentioning

confidence: 99%

“…This finding contradicts those of Rashid et al (2017) and Rizvi et al (2020), who found that Islamic banks contributed more to financial stability than conventional ones. In relation to this situation, Islamic banks possibly undertake financing activities that involve less prudent risk management compared to their counterparts, as predicted by Mohamad et al (2018) and Kasri & Azzahra (2020).…”

Section: Resultsmentioning

confidence: 99%

“…However, debate continues concerning the findings of Uddin et al (2017) and Kasri & Azzahra (2020), who argue that Islamic and conventional banks are the same from the perspective of financial fragility in many economic circumstances. Other studies have obtained different results, such as those of Mohamad et al (2018) and Albaity et al (2019), who explain that conventional banks are better off in financial stability while Islamic banks are worse off.…”

Section: Introductionmentioning

confidence: 94%

“…This finding is similar to those of Kasri & Azzahra (2020), who used Indonesia as the study object. In the case of Malaysia, Mohamad et al (2018) explain that conventional banks are more stable than Islamic ones because they Islamic banks have a higher risk of providing financing activities to deficit units. Albaity et al (2019) also found that Islamic banks in the MENA region were more vulnerable in terms of banking stability.…”

Section: Introductionmentioning

confidence: 99%

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The Contribution of Islamic and Conventional Banks to Financial Stability in Indonesia

2023

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This study aims to examine an asymmetric relationship between Islamic and conventional bank contributions to financial stability in Indonesia. Adopting non-linear autoregressive distributed lag (NARDL), the study utilizes time-series data from 2004m1-2021m9, consisting of financial stability as a dependent variable, proxied by non-performing loans (NPLs) and ZSCORE. Islamic and conventional banks as independent variables were measured by total financing and total assets. Furthermore, we used interest rates and inflation as complementary variables. The findings reveal that Islamic and conventional banks affect financial stability in the short and long run. However, conventional banks contribute to financial stability more than Islamic banks. The asymmetric relationship explains that an increase/decrease in the independent variables to the same degree does not have the same impact on the dependent variable. This research implies that the financial authorities need to increase their awareness of the presence of asymmetric relationships when designing monetary policy to achieve and maintain financial stability. Finally, the study also fills the current research gap by measuring the contribution of Islamic and conventional banks to financial stability from an asymmetric relationship viewpoint.JEL Classification: E60, G20, G21How to Cite:Fakhrunnas, F., Nahda, K., Chowdhury, M.A.M. (2023). The Contribution of Islamic and Conventional Banks to Financial Stability in Indonesia. Etikonomi, 22(1), 213–232. https://doi.org/10.15408/etk.v22i2.26656.

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Section: Resultsmentioning

confidence: 99%

Section: Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 94%

Section: Introductionmentioning

confidence: 99%

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The Contribution of Islamic and Conventional Banks to Financial Stability in Indonesia

2023

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“…Olson found that Islamic banks are more stable than conventional ones. Conversely, Mohamad et al (2018), Albaity et al (2019), and Kasri and Azzahra (2020) explain that conventional banks are stronger than Islamic ones in terms of financial stability. However, Uddin et al (2017) conclude that both types of banks show no differences in banking stability.…”

Section: Introductionmentioning

confidence: 98%

Assessing the Islamic banking contribution to financial stability in Indonesia: A non-linear approach

Fakhrunnas

Anto

2023

Banks and Bank Systems

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Islamic banks have become alternative intermediary institutions in the banking industry and are expected to play a significant role in the financial system. Therefore, this study aims to examine Islamic banks’ contribution to financial stability, also focusing on the underlying contracts implemented in financing activities from the perspective of a non-linear relationship. The study employs time-series data from 2006m1 to 2021m11 and adopts non-linear autoregressive distributed lag (NARDL). The findings reveal that the presence of Islamic banks has a non-linear influence on financial stability. Overall financing has a symmetric effect on financial stability, but an asymmetric effect is evident when total financing is categorized based on underlying contracts. Moreover, in the short run, musharakah financing strengthens financial stability, while during a long-run relationship mudarabah financing plays the most pivotal role in increasing the level of stability in the banking system. The study proposes that the financial authorities should be concerned with the non-linear symmetric and asymmetric relationships with Islamic banks, particularly in the underlying contracts that the banks employ. This is considered to be important to avoid financial instability in the banking system. AcknowledgmentThe authors gratefully acknowledge the support from Direktorat Penelitian dan Pengabdian Masyarakat (DPPM) Universitas Islam Indonesia No.: 023/ Dir/ DPPM/ 70/ Pen.Unggulan/ XII/ 2022 and for providing a research grant for the study.

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Islamic marketing of conventional banks: bridging managers’ and clients’ perceived gaps

Islam,

Hasan

2024

JIABR

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Purpose While the Noble Quran dictates the prohibition of interest, conventional banks promote Islamic banking by opening Islamic banking windows. Against this backdrop, this study aims to investigate the perceived gaps between managers and clients in Islamic marketing and banking, focusing on conventional banks’ Islamic banking windows. Design/methodology/approach Guided by a qualitative approach, semi-structured personal interviews and observations served as the data collection methods, involving 25 banks and 50 respondents in 3 different districts, namely, Shirajganj, Rajshahi and Chapainawabganj of Bangladesh from January to October 2023. The data were analysed using ATLAS.ti 2023 to explore codes and quotations derived from 14 interview questions. Further, ATLAS.ti 2023 facilitated synthesizing content, concepts, code occurrence, network analysis and thematic analysis. Findings Islamic and non-Islamic banks use Quranic verses, hadiths (prophetic traditions), images of mosques, the Kaaba and Arabic texts as Islamic marketing tools. These spiritual, divine and prescriptive tools are associated with Islamic banking. However, conventional banks receive criticism for having separate Islamic banking windows to serve religiously conscious clients, which generates tension among clients and bank managers. Practical implications The findings can theoretically assist academics in examining conventional banks’ Islamic marketing and banking practices, opening Islamic banking windows. Importantly, Shariah boards can play policy roles in safeguarding the function of Islamic marketing and banking. Managers can use the findings to anticipate client perceptions and enhance Islamic marketing and banking strategies. Likewise, the social implications include the explicit stance of Shariah to mitigate the mixture of halal and haram banking. Originality/value This pioneering study explores the perspectives of Islamic banking windows by non-Islamic banks. The combination of Islamic marketing and banking is a noteworthy novelty in this study and deserves recognition for its unique contribution to halal marketing and finance.

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Islamic Versus Conventional Banking: Characteristics and Stability Analysis of the Malaysian Banking Sector

Cited by 3 publications

References 4 publications

The Contribution of Islamic and Conventional Banks to Financial Stability in Indonesia

The Contribution of Islamic and Conventional Banks to Financial Stability in Indonesia

Assessing the Islamic banking contribution to financial stability in Indonesia: A non-linear approach

Islamic marketing of conventional banks: bridging managers’ and clients’ perceived gaps

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