• Title/Summary/Keyword: Islamic Banking

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The Development of Islamic Banking and Financial Institution in United Kingdom

  • Azma, Nurul;Aisyah, Siti;Izzah, Nurul;Rahman, Mahfuzur
    • Asian Journal of Business Environment
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    • v.8 no.2
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    • pp.5-13
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    • 2018
  • Purpose - The aim of this study is to investigate the problems, challenges, opportunities and future prospects of Islamic banking and finance in the UK. However, this study brings forward into 3 main purposes. Firstly, to explore the development of financial institutions, products and regulatory reforms. Secondly, to find out the performance of Islamic banking institutions. Lastly, to identify the problems, challenges and Islamic banking future prospects. Research design, data, and methodology - An in-depth literature review was carried out to fulfil the research objectives. Results - The findings point out the basic problems of Islamic banking industry in UK such as unfavorable regulatory environment, unfamiliarity with the Islamic Banking System, lack of portfolio management, absence of liquidity instruments, in need of professional bankers, and blending of approach of Islamic scholars with the approach of the conventional bankers. The findings also indicate that there are greater opportunities in the UK for development and growth of Islamic financial system because Muslim community is eager to take financial products. Conclusions - It is hoped that issues pertaining to Islamic banking products can be resolved through consensus of Shariah scholars. There is need to educate the Muslim community about Islamic financial products and service.

Perceptions of Islamic banking products: Evidence from Malaysia

  • RAHMI, Mustika;AZMA, Nurul;OBAD, Fahd Mohammed;ZAIM, Muhammad;RAHMAN, Mahfuzur
    • Asian Journal of Business Environment
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    • v.10 no.3
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    • pp.35-42
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    • 2020
  • Purpose: Islamic banking products and services have always claimed to be unique from its traditional interest-based counterpart. However, in practice, many Islamic banks are alleged to have drifted away from its paradigm version. The purpose of this study is to gauge the perception of university students in Malaysia towards Islamic banking products. Research design, data and methodology: Data were collected from 250 Malaysian university students. Structural Equation Modeling (SEM) was performed to test proposed hypotheses to identify factors influencing customers' perception toward Islamic banking products. Results: The main finding indicates that most of the respondents are familiar with Islamic banking products and consider Islamic banking products as useful as its conventional counterparts. The regression results show that respondents are less convinced of adherence to Shari'ah, efficiency and helpfulness of existing Islamic banks. Conclusions: This is a cue to the Islamic banks' stakeholders that they need to realign their practices in an ethically responsible way in accordance with Shari'ah if they wish to secure existing customers and attract potential ones. In a competitive banking environment, most banks provide efficient and readily available service; thus, focusing on this as a strategy hardly distinguishes an Islamic bank from an interest-based bank.

Financial Reforms and Technical Efficiency: A Case Study of Islamic Commercial Banks in Indonesia

  • HERSUGONDO, Hersugondo;WAHYUDI, Sugeng;LAKSANA, Rio Dhani
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.4
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    • pp.849-855
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    • 2021
  • The purpose of this study is to analyze and compare Islamic commercial banks and Islamic banking units with the stochastic frontier analysis (SFA) method during 2014-2018. The data in research using Islamic commercial banks and Islamic banking units. There are 10 Islamic commercial banks and 5 Islamic banking units that meet the criteria of purposive sampling. The calculation of efficiency level using the SFA method with the function of production shows that Islamic commercial banks and Islamic banking units always experience an increase in efficiency every year with the average level of efficiency of Islamic commercial banks being 0.43994, while the average rate of efficiency of Islamic banking units is slightly higher at 0.47654. This shows that Islamic banking units are slightly more optimal in generating total financing in the period 2010-2014. The test results using Independent Sample T-Test can be concluded that there is no difference in the efficiency value between Islamic commercial banks and Islamic banking units. Operating costs are not significant and have a positive effect on the total financing; total assets have a significant effect and a positive impact on total financing; labor costs are not significant and have a negative effect on total financing.

Sharia Banking Stability Against Macroeconomic Shocks: A Comparative Analysis in the ASEAN Region

  • ZAHRA, Siti Fatimah;MURDAYANTI, Yunika;AMAL, Muhammad Ihlashul
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.4
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    • pp.151-159
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    • 2021
  • This study aims to compare the level of stability of the Islamic banking system in the ASEAN region, particularly in Indonesia, Malaysia and Brunei Darussalam in the face of macroeconomic turmoil. The data used in this study is secondary data obtained from the official website of the government and banks of each country, with sampling using purposive sampling technique during the period 2013 to 2019. The data analysis method used is panel data using Eviews software. The results showed that the average Z-score value of Islamic banking during the study period in each country was Indonesia (15.61), Malaysia (15.56) and Brunei Darussalam (19.10). The GDP (X1) has a positive effect on the stability of Islamic banking by 54.29%, inflation (X2) has a negative effect of -12.24% on the stability of Islamic banking, and the exchange rate (X3) has a positive effect on the stability of Islamic banking by 42.58%. The findings of this study indicate that the three countries have an average Z-score value that is higher than 2.99, so this shows that Islamic banking in several ASEAN countries is in a stable condition. In addition, a higher GDP and a stronger exchange rate can also encourage a more stable Islamic banking.

Customer Adoption of Islamic Banking Services: Empirical Evidence from Indonesia

  • SUDARSONO, Heri;TUMEWANG, Yunice Karina;KHOLID, Muamar Nur
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.3
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    • pp.1193-1204
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    • 2021
  • This paper aims to examine the main factors that influence the adoption of Islamic banking services in Indonesia. This research collects primary data by distributing questionnaires to 550 respondents in 29 provinces in Indonesia. A total of 550 questionnaires were returned comprising 34.2 percent male respondents and 65.8 percent female respondents. Most of the respondents were in the age group of 21-30 years with the highest level of education being high school. Most of the respondents were working in private firms, with a monthly expenditure of IDR 2,500,000. The independent variables in this study are bank reputation, perceived complexity, perceived compatibility, perceived risk, relative advantage, religiosity, and social influence. Meanwhile, the dependent variable is customer interest in adopting Islamic banking services. The result of this study indicates that awareness and perceived compatibility have a positive effect on customer intention to adopt Islamic banking services. Likewise, religiosity and social influence also have a significant and positive effect on customer intention to adopt Islamic banking services. Meanwhile, bank reputation and perceived complexity have no effect on customer intention to adopt Islamic banking services. Lastly, perceived risk has a negative and significant effect on customer intention of adopting Islamic banking services in Indonesia.

Measurements of Service Quality of Islamic Banking in Malaysia: A Non-Malaysian Customers' Perspective

  • SAAD, Abdo Yousef Qaid;ALSHEHRI, Amer M Alhusini
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.5
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    • pp.413-420
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    • 2021
  • The study aims to measures the service quality of Islamic banking in Malaysia from non-Malaysian customers' perspective based on the six different dimensions of the SERVQUAL model, namely, Shariah, assurance, reliability, tangibles, empathy and responsiveness. This study surveyed 100 non-Malaysian respondents from 25 different countries who have first-hand experience with Islamic banking services in Malaysia. The collected data were analysed by using the SPSS v23 for reliability analysis and descriptive statistics. The results indicates that customers' impressions of Islamic banks' service quality in Malaysia did not meet their standards. The independent variables, namely, compliance, assurance, reliability and empathy have positively affected customer satisfaction, while two dimensions, namely, tangibility and responsiveness does not significantly influence non-Malaysian customer satisfaction in the Islamic banking system in Malaysia. The findings of the study suggested that the Islamic banks should develop and obey the customer perception's policy by following customers' expectations and the results are also expected to include recommendations for improving the level of satisfaction of the Islamic banking system's foreign clients in Malaysia. Since this study was limited to Islamic banks in Malaysia, the findings may not be applicable to other traditional banks.

Competition of Islamic Bank in Indonesia

  • Humairoh, Syafaqatul;Usman, Hardius
    • Journal of Distribution Science
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    • v.14 no.6
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    • pp.39-44
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    • 2016
  • Purpose - This paper aims to study the competition that occurs in the Islamic Banking industry and to analyze the variables that affect the total revenue of Islamic Banking in Indonesia. Research Design, Data and Methodology - This study observed 10Islamic banks for the period 2010-2013. The annual data are taken from Direktori Perbankan Indonesia, published by Bank Indonesia, and annual report of the observed banks. In analyzing data, Panzar Rosse Approach was applied to analyze the type of Islamic Bank Market and Panel Regression Model for the estimated co-efficients has been used in the Panzar Rosse Approach. Results - Estimation model shows that all the banking cost elements such as the price of capital, unit price of labor, and unit prices of funds have significant positive correlation to Revenue as a dependent variable. The estimated value of H-statistic for the period 2010-2013 is 0.69. It can be interpreted that Islamic banking market in Indonesia shows monopolistic competition. Price of capital and funds has statistically significant effect on Bank's Revenue. Conclusions - The study revealed that the Islamic banking market competition in Indonesia is monopolistic and the major contribution to the H-statistic comes from mainly price of funds.

Lifestyle Segmentation: The Comparison of Islamic and Conventional Banking Customers in Indonesia

  • Sutarso, Yudi;Rustiana, Elly;Hanum, Rizky Amalia;Gunawan, Wibiksono K
    • Journal of Distribution Science
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    • v.10 no.8
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    • pp.25-34
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    • 2012
  • Understanding customer' lifestyles important for banks because it will guide in determining marketing policies, such as services, pricing, service delivery and promotion decisions. From the customer' lifestyle, banks will know what kind of customers' attitudes, interests and opinions, so they also will understand what the costumer' needs and what services needed by them. For Islamic banks, customers understanding are important because, nowadays, the competition of the banks is not only with other Islamic banks but also with the well-established conventional banks offering Islamic products or services The aims of this research paper are to describe what factors underline the customer's lifestyle of both Islamic and conventional bank, to segment the bank customers based on their lifestyles and investigate the profile of each segments, to compare the characteristics of the segments, and to identify marketing policies based on the characteristics. The population of the study is banking customers in Indonesia, in which the researchers have used judgment sampling as sample selection. There were 186 customers of Islamic banks and 244 customers of conventional bank as respondents in this study. Statistical methods employed were exploratory factor analysis and cluster analysis. The finding of the study shows that there are twelve factor underlining the customers' lifestyle, namely: factor of fashion conscious, internet usage, sports spectator, financial and technology optimism, price sensitivity, independent, compulsive housekeeper, new brand tryer community activities, opinion leader, credit usage, and homebody. In addition, for Islamic banking, there are two market segments, namely fashionable-independent and innovative-social segment. Based on the lifestyle characteristics, the first segment has higher level in factor of fashion conscious, homebody, independent, optimism and price conscious, which is therefore called fashionable-independent segment. On the other hand, the second cluster has higher level in factor of new brand tryer, community minded, sport spectator, credit user, internet usage, opinion leader, and compulsive housekeeper, which is therefore called the innovative-social segment. Furthermore, for conventional banking, there are also two segments, namely persuasive-optimistic and sensitive-independent segment. The first segment has higher level on some factors, namely: opinion leader, optimism, internet usage rate, credit usage level, sport spectator, and new brand tryer. On the other hand, the second cluster is characterized by higher level in factor of price conscious, confidence, community minded, homebody, fashion conscious, and compulsive housekeeper. Managerial implications for the management of Islamic banks could be identified in this study as follows. Firstly, the twelve lifestyle factors of this study could be an alternative view in observe Islamic banking customers. The domination of both the fashionable conscious and the internet usage factor show that the aspects are quite instrumental in perceiving the customer' lifestyles, in which reflects the importance of these two aspects to customers. Secondly, in serving their customers, Islamic banks need to understand the customer lifestyle, in which the lifestyle segments found in this study provide a guide of how their needs were reflected. Finally, by understanding the segments and the characteristics each segment of the conventional banks, Islamic banks could adjust their marketing strategies differently from the conventional banks.

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Islamic Banking Ranking Efficiency Based on a Decision Tree in Iran

  • Salehi, Mahdi;Khaksar, Jalil;Torabi, Elahe
    • Asian Journal of Business Environment
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    • v.4 no.2
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    • pp.5-11
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    • 2014
  • Purpose - This study attempts to examine Islamic banking practices in Iran based on new scientific methods. Design, methodology, and approach - The study used financial ratios demonstrating healthy or non-healthy banks to assess the financial health of banks listed on the Tehran Stock Exchange. The assessment of these ratios with a decision tree as a non-parametric method for modeling is recommended to present this model. Information about the financial health of banks could affect the decisions of different groups of banks' financial report users including shareholders, auditors, stock exchanges, central banks, and so on. Results - The results of the study show that a decision tree is a strong approach for classifying Islamic banks in Iran. Conclusions - To date, several studies have been conducted in various countries on the topic of this study. Considering the importance of Islamic banking, this is one of the first studies in Iran the outcomes of the study may prove helpful to the Iranian economy.

Evaluation of Islamic Banking Efficiency in Iran

  • Khaksar, Jalil;Salehi, Mahdi;Torabi, Elahe
    • East Asian Journal of Business Economics (EAJBE)
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    • v.2 no.2
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    • pp.37-47
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    • 2014
  • Purpose - In this study, it is attempted to examine the Islamic banking practice in Iran based on new scientific methods. Design/methodology/approach- It is used the financial ratios demonstrating healthy or non-healthy of banks to assess the financial health of listed banks in Tehran Stock Exchange. The assessment of these ratios with use of decision tree as a non-parametric method for modeling is recommended for presenting this model. Information about the financial health of banks could be effective on the decisions of different groups of banks' financial reports users, including shareholders, auditors, stock exchange, central bank and etc. Findings - the results of the study show that Decision Tree is strong approach in order to classifying Islamic banks in Iran. Originality/value- So far, several studies have been conducted in various countries on the topic of this study. Considering the importance Islamic banking, it is almost the first study in Iran and the outcomes of the study may helpful to Iranian economy.