Loan growth, capitalization, and credit risk in Islamic banking

Sobarsyah, Muhammad; Soedarmono, Wahyoe; Yudhi, Wahdi S. A; Trinugroho, Irwan; Warokka, Ari; Pramono, Sigid Eko

doi:10.1016/j.inteco.2020.02.001

Cited by 39 publications

(50 citation statements)

References 26 publications

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“…As a result of mergers, rising banks combine more and hence have lower returns. Some recent developments in this area of literature (Adesina, 2019;Aysan and Disli, 2019;Bustamante et al, 2019;Dang, 2019;Jiang et al, 2020;Nguyen & Dang, 2020;Sobarsyah et al, 2020;Wei et al, 2019) discuss the relationship of loan growth, bank risk and profitability. Adesina (2019) suggests that asset portfolios' poor performance hampers banks' capacity to make loans.…”

Section: Review Of Literaturementioning

confidence: 99%

“…However, this effect is considerably moderated by greater bank concentration. Another study on a sample of Islamic banks from 29 countries examined the impact of loan growth and capitalization on credit risk ( Sobarsyah et al., 2020 ). The findings show that higher loan growth increases credit risk one year ahead, especially for Islamic banks with greater capitalization.…”

Section: Review Of Literaturementioning

confidence: 99%

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Loan growth and bank risk: empirical evidence from SAARC countries

Bhowmik

Sarker

2021

Heliyon

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During the last few decades, the world financial crisis sheds on the bank risk, which creates a direct threat to the existence of banks. This paper investigates the relationship between bank risk and loan growth in the South Asian economies. The study has collected data from BankFocus of 118 commercial banks from 2011 to 2019. This study explores three hypotheses explaining the relation between (i) Bank Risk and Loan Growth; (ii) Loan growth and Bank Profitability; and (iii) Loan growth and bank solvency. Results show that loan growth can induce bank risk in the South Asian economic region. At the same time, Banks' solvency and profitability are correlated to bank risk with statistical significance. Primarily OLS has been applied, followed by GMM estimation. Non-Performing Loan (NPL) has been used as the proxy of bank risk. Further, to check the robustness of the investigation, we have used ZSCORE as a replacement to NPL. The results derived from regressions can put light on banks' poor performance in the South Asian counties and, simultaneously, may set guidance for policymakers of emerging economies.

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Section: Review Of Literaturementioning

confidence: 99%

Section: Review Of Literaturementioning

confidence: 99%

Loan growth and bank risk: empirical evidence from SAARC countries

Bhowmik

Sarker

2021

Heliyon

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“…When the amount of non-performing loans of banks continue to surge, customers lose faith and confidence in the ability of the banks to manage their deposits properly which eventually results in the failure of the bank. Sobarsyah et al (2020) find that the effect of NPLs is not only detrimental to the balance sheet of banks, threating it performance but affects the very sustainability of the banking sector. Mwangi (2012) found an inverse relationship between NPLs and bank profitability and as the value of NPLs increase, bank profitability declines.…”

Section: Introductionmentioning

confidence: 97%

“…Research over the years have suggested that many banks in Ghana are making huge losses due to the problem of non-performing loans on their books and this is negatively affecting not only the banking industry but other industries. (Alshatti, 2015;Richard, 2016;Sobarsyah et al 2020). Increasing NPLs is an important and recurrent issue that management of banks have to face in the course of doing business which is not just a problem of the Ghanaian banking sector but a worldwide challenge (Asantey & Tengey 2014;Eston, Willy, & Agnes, 2016;Pop, Cepoi, & Anghel, 2018).…”

Section: Introductionmentioning

confidence: 99%

Effect of Non-Performing Loans on the Profitability of Universal Banks: A Time Series Analysis of the Ghanaian Banking Industry

2022

RJFA

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The primary purpose of this research is to examine the effect of Non-Performing Loans (NPLs) on the profitability of universal banks in Ghana. The study is focused on the effect of non-performing loans on return on assets and return on equity of universal banks in Ghana. The study uses quarterly time series data collected by Bank of Ghana on all universal banks operating in the banking sector for the period 2007 -2018. The multiple regression technique is used to analyse the models developed. The study reveals that non-performing loans have a significant negative effect on return on equity of universal banks in Ghana. The study also reveals a significant negative relationship between non-performing loans ratio and return on asset. The study recommends an improvement in the profitability of universal banks by reducing non-performing loans in individual banks. Universal banks must improve their loan monitoring strategies and manage their loan risk exposure to customers. The study recommends an improvement of the regulatory system of the central bank. Appropriate guidelines must be instituted by the central bank to prevent universal banks from advancing loans to customers with high credit risk.

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“…Islamic banks are banks that operate without relying on "interest". This Islamic bank is a bank that abandons the problems of usury (Sobarsyah et al, 2020). Thus, avoiding bank interest which is considered usury is one of the challenges faced in the Islamic world.…”

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confidence: 99%

The Importance of Improving Service Quality for Customer Satisfaction: A Case Study of Bank Muamalat in Bogor City

Rofiyanti

Mayagita

Omboto³

et al. 2022

ijss

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The development of the banking world in Indonesia is marked by one of them is the establishment of Islamic banks. Islamic banks are banks that operate by not relying on bank interest. With a population that is 80% Muslim, Islamic banks are predicted to have very good prospects in the future. However, the current fact is that there are still many customer complaints related to the quality of service at Islamic banks. This study aims to answer the questions on how the service quality of Bank Muamalat Bogor and how the customer satisfaction is perceived by customers of Bank Muamalat Bogor. The data collection technique was carried out by participant observation and semi-structured interviews since this type of interview is more flexible in which questions can be adapted and changed depending on the answers of the informants. For this study, researchers interviewed 15 bank customers. The results of this study indicate that of the 5 dimensions of service quality, 3 of them received negative responses from customers, namely reliability, assurance and tangible. However, apart from the negative responses, Bank Muamalat with a sharia basis also received a positive assessment for the dimensions of responsiveness and empathy in which customers are satisfied with the services provided by friendly and patient staff who have a high sense of empathy. However, the friendliness and kindness of the staff only is not sufficient. To be able to compete with other commercial banks, Bank Muamalat must be able to improve the quality of its services from all the 5 dimensions of service quality

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Loan growth, capitalization, and credit risk in Islamic banking

Cited by 39 publications

References 26 publications

Loan growth and bank risk: empirical evidence from SAARC countries

Loan growth and bank risk: empirical evidence from SAARC countries

Effect of Non-Performing Loans on the Profitability of Universal Banks: A Time Series Analysis of the Ghanaian Banking Industry

The Importance of Improving Service Quality for Customer Satisfaction: A Case Study of Bank Muamalat in Bogor City

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