Monetary Operations and Islamic Banking in the GCC: Challenges and Options

Basu, Ritu; Prasad, Ananthakrishnan; Rodríguez, Samuel

doi:10.5089/9781513588513.001

Cited by 16 publications

(8 citation statements)

References 4 publications

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“…IB's asset is more liquid than CB's as represented by CTA. This result confirms hypothesis H2, which is consistent with Basu et al .’s (2015) findings. However, CB has the better CTD ratio, indicating that compared to IB, CB asset has more cash than its customer deposit.Contrary to hypothesis H3, IBs carry higher credit risk compared to CBs.…”

Section: Regression Findingssupporting

confidence: 93%

The Tunisian Islamic and conventional banks: a performance comparative study

Neifar,

Gharbi

2023

IES

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PurposeThis paper aims to determine whether Islamic banks (IBs) and conventional banks (CBs) in Tunisia are distinguishable from one another based on financial characteristics during the 2005–2014 period covering the 2008 global financial crisis (GFC) and the 2011 Tunisian revolution.Design/methodology/approachFor the comparison between IBs and CBs, 11 hypotheses are formulated to distinguish between the two types of banks. The authors use a univariate analysis based on the multi-dimension figures investigation and a multivariate one based on the robust OLS technique for panel linear regression with mixed effects.FindingsBank-specific factors, dummy and dummy interacting variables indicate that there are differences between Islamic and conventional bank behavior. Both methods show that IBs are more liquid, more profitable and riskier than CBs. Post-2011 Tunisian revolution, small IBs (small CBs) are more (less) solvent, large IBs are more stable and both types of banks are more liquid, which explain why Tunisian governments have relay on bank system to cover budget deficits post-2011 revolution.Originality/valueIn investigating the feature of IBs and CBs from the Tunisian context, the authors take into account the effect of two abnormal events (2008 GFC and 2011 Tunisian revolution) on IBs through interaction variables.

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Section: Regression Findingssupporting

confidence: 93%

The Tunisian Islamic and conventional banks: a performance comparative study

Neifar,

Gharbi

2023

IES

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“…As Islamic banks perform maturity transformation functions, they are liquidity creation distributors. In this context, Basu et al (2015) state that investment deposits in Islamic banks usually have maturities of 12 months, while Musharaka and Mudaraba are long-term investments. According to Beck et al (2010), academics and policymakers "alike point to the advantages of Sharia-compliant financial products, as the mismatch of short-term, on-sight demandable deposit contracts with long-term uncertain loan contracts is mitigated with equity and risk-sharing elements."…”

Section: Islamic Bank Intermediation and Money Creationmentioning

confidence: 99%

Does PLS in Islamic banking limit excessive money creation?

Jedidia

Hamza

2023

JIABR

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Purpose Bank lending is the major source of monetary expansion. Bank-led money creation is a key issue in both conventional and Islamic financial systems. The purpose of this paper is to examine the issues related to Islamic banking money creation. In this conceptual paper, the authors investigate the involvement of profit and loss sharing (PLS) in money creation and especially how can PLS limit money creation “out of nothing.” In this regard, the authors examine the potential of the PLS principle in tackling the excessive money creation phenomenon. Design/methodology/approach This study uses a normative approach regarding Islamic bank money creation that fits Sharia directives. In fact, this study discusses “what ought to be,” that is, the values and norms of PLS money creation that impede excessive money creation. Findings Overall, Islamic banks create money differently compared to conventional ones. Especially, by avoiding a purely financial intermediary, money creation under the PLS principle sustains a strong relationship with the real economy and leads to a lower money multiplier. Therefore, PLS mechanisms allow financing through real assets and not credit assets “out of nothing.” This could prevent excessive money creation from causing harmful effects on indebtedness and financial instability. Practical implications PLS offers a valuable resolution for banking system money creation through the optimization of Islamic bank financing by facilitating the separation of the monetary function from the credit one. This reform thought reinforces the stability value of money allowing it to fully perform its functions with reference to the directives of Sharia. This especially allows the integrity and purchasing power of money, the reduction of the gap between the evolution of both real and financial economies and, consequently, the indebtedness and crisis. It is recommended to promote PLS financing by reforming institutional and regulatory constraints. Originality/value This study addresses the contemporary issue of money creation by Islamic banks through the PLS approach. The conceptual framework of this paper highlights the reformist role of PLS in limiting money creation through Mudarabah approach within fractional reserve banking.

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“…Hal lain yang juga menjadi perhatian bersama adalah terkait masih kurangnya instrumen moneter berbasis syariah bisa memenuhi kebutuhan likuiditas perbankan syariah. (Basu et al, 2015) dari organisasi International Monetary Fund (IMF) telah mengkonfirmasi kondisi tersebut dalam kajian mereka terhadap negara-negara di kawasan Teluk, anggota dari GCC (Gulf Cooperation Council). Di setiap negara berbeda kondisi tergantung pada tingkat permisivitas serta ketersediaan instrumen berbasis syariah.…”

Section: Diskusiunclassified

Pengaruh Kebijakan Moneter Terhadap Kinerja Bisnis Perbankan Syariah

Husna

Atika

Wahyudi

et al. 2021

j.ris.akunt.dan n.a

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This paper is a literature review that aims to investigate the effect of monetary policy on the performance of Islamic banking. The methodology used is a review of previous studies both on a local Indonesian scale and on an international scale. The result, it was found that there are two classifications of the researchers views regarding this topic. The most of researchers conclude that monetary policy has negative effects on the performance of Islamic banking, while other conclude that monetary policy has no effect on the performance of Islamic banking. The basic thinking for this different findings can be referred to the classical opinion, that monetary policy is a "black box" that is influenced by the behavior of stakeholders, time lag, and changes in the strategy for formulating monetary policy transmission. Some suggestions found of this research is the claim that there is still a lack of sharia-based liquidity instruments that can be used as a valuable input for the monetary authorities.

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Monetary Operations and Islamic Banking in the GCC: Challenges and Options

Cited by 16 publications

References 4 publications

The Tunisian Islamic and conventional banks: a performance comparative study

The Tunisian Islamic and conventional banks: a performance comparative study

Does PLS in Islamic banking limit excessive money creation?

Pengaruh Kebijakan Moneter Terhadap Kinerja Bisnis Perbankan Syariah

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