Conventional Banks Research Articles

Effects of Financial Bootstrapping Techniques on Operational Performance of Small and Medium-Sized Enterprises (SMEs) in Lagos State

Accessing credit from the conventional banks has been one of the major challenges of Small and Medium-Sized Enterprises (SMEs) in achieving their goals and objectives. This has made SMEs not able to achieve their operational objectives from time to time, thus affecting overall performance of the business. The SMEs operators are forced to design methods which funds could be raised to finance the operational activities. The study investigated the effects of financial bootstrapping techniques on the performance of SMEs in Lagos State. Owner-related finance, delaying payments and customer-related finance were adopted as the financial bootstrapping techniques while operational performance is viewed from the angle of business operations. The study employed survey research design with simple random sampling method. Questionnaire was used as a research instrument for primary source of data collection. 226 copies of questionnaires were administered to SMEs operators in Lagos State, but 219 copies were returned. The findings of the regression analysis revealed that owner related finance and customer-related finance have significant effect on operational performance of SMEs in Lagos State. Delaying payments has no significant effect on operational performance of SMEs in Lagos State. The study recommended that SME operators focus more on owner-related and customer-related financing techniques, and that they consider utilising delaying payment techniques.

The Determinants of Bank’s Liquidity: Comparative Analysis From Global Islamic Banks and Conventional Banks

This study investigates the determinants of bank liquidity in both Islamic and Conventional banks across 15 countries, focusing on key variables such as profitability, capital adequacy, bank size, and credit risk. Utilizing data from 107 Islamic banks and 506 Conventional banks spanning from 2013 to 2022, the analysis reveals significant differences in liquidity management between the two banking systems. The Random Effect Model (REM) was employed based on the Hausman test results to ensure robustness. The findings indicate that profitability negatively impacts liquidity in Islamic banks, likely due to investments in less liquid, Sharia-compliant assets, while it positively influences liquidity in Conventional banks, where profits are often reinvested into liquid assets. Capital adequacy emerges as a crucial determinant of liquidity in both bank types, highlighting the importance of maintaining strong capital buffers. The study also finds that credit risk significantly reduces liquidity in Conventional banks, whereas it has a lesser impact on Islamic banks. These insights contribute to a deeper understanding of liquidity management practices in Islamic and Conventional banks, offering valuable implications for bank managers, policymakers, and regulators.

The Impact of COVID-19 Pandemic on the Banking Industry and Its Customers

, including customer demand, digital transformation, risk management methods, and overall financial performance. Focusing on shifts in client demand for loans and financial products, the rise of digital banking, and banks' reactions to increased financial risks, this study examines how the pandemic affected conventional banking operations and customer interactions. The goals of the research are to look at how banks changed their services throughout the pandemic, how they dealt with risk, and how well they did financially. The research relies on secondary data analysis that scours academic journals, government documents, business reports, and bank records. Findings highlight a sharp drop in loan demand in the early phases of the epidemic, followed by a dramatic increase in demand for mortgage refinancing and corporate loans supported by the government. Online and mobile banking saw a meteoric rise in popularity as more and more clients made the switch. Lending restrictions and provisions for non-performing loans were tightened by banks in response to financial instability, which had a detrimental impact on their profitability. Better digital banking infrastructure, more robust risk management frameworks, and more adaptable financial products that can react to crises more effectively are some of the long-term consequences that the study emphasizes for the banking sector. At its end, the paper suggests ways financial institutions might be better ready for future disruptions and urges additional investigation into how fintech will play a role and how regulations will alter in the banking industry after a pandemic.

The Rise of Digital Banking in the UK Financial Sector and Its Impact on Commercial Banks

In the contemporary financial domain, the emergence of digital banks has revolutionized operational models in traditional commercial banking. This article delves into how digital banks, through advanced technology and customer-centric services, compel commercial banks to revaluate their operational and regulatory frameworks. Specifically, it focuses on the digital banking market in the UK, analyzing how digitalization and technological progress are driving the evolution of competitive dynamics within the financial sector. As one of the worlds foremost financial hubs, the UKs trends in financial market development have profound implications for the global financial system. The British government and regulatory bodies have proactively adapted to these shifts, framing policies that facilitate innovation while ensuring security and compliance within digital banking. This backdrop sets the stage for this report to explore the transformative impact of digital banks on traditional banking models in the UK, aiming to understand the regulatory adaptations and the overall influence of digital entities on the conventional banking landscape.

EVOLUSI BANK KONVENSIONAL DALAM PERSPEKTIF TEORI PUSH PULL MOORING

This study aims to identify differences in customer perceptions of push and pull factors in switching from conventional banking services to digital banking at Bank Mandiri Tanjung Perak Branch in Surabaya. The research methodology involves questionnaires for quantitative data collection and documentation to support the data. Analysis is conducted using the Push Pull Mooring (PPM) theory to evaluate the influence of Service Quality, Perceived Ease of Use, and Lifestyle on customers' Switching Intention. The findings indicate that for customers with less than 5 years of transaction experience, service quality and ease of use of digital services influence their intention to switch. For customers with more than 5 years of experience, service quality and ease of use have different impacts on switching intention. The t-test results show that switching intention is not significantly influenced by the duration of use (P value 0.93), but lifestyle significantly affects preference for digital services (P value 0.003). Perceived ease of use does not show a significant difference between the two groups (P value 0.716), while service quality shows a significant difference (P value 0.014). The application of these research findings to other Mandiri branches needs to consider demographics, strategy adaptation, and continuous evaluation. Bank Mandiri can optimize its services by focusing on customer retention, lifestyle, ease of user experience, and improving service quality. Understanding the interaction effects between these variables helps Bank Mandiri adapt holistic and customer-oriented strategies. Thus, Bank Mandiri can enhance its competitiveness in an increasingly dynamic market.

Banks on a plane: The possibilities and limits of spatial accessibility measures for understanding geographies of financial exclusion

This paper examines how the underlying assumptions of geospatial accessibility metrics impact their representation of social and spatial relations and how these assumptions ultimately produce differing understandings of financial exclusion and its geographies. As increasing scholarly and public attention has been paid to the role of policy and institutions in (re)producing racial inequality in the United States, the role of the financial and banking system has taken on a particular importance. While conventional banking services offer the foundations of economic opportunity through savings and credit, these institutions have rarely been spatially uniform in their distribution or equally available to all classes of people. Instead, the growth of alternative financial services (or AFS) has sought to target those left out of the conventional banking system, offering higher interest and often predatory lines of credit to already marginalized people and communities. In order to examine financial exclusion and its geographies, this paper maps both banks and AFS in the Atlanta metropolitan region using five different methods for measuring spatial accessibility. Ultimately, while each of these five methods reveals a bifurcated pattern of financial exclusion across the metro where wealthier, whiter areas have higher access to banks and lower access to AFS and poorer, predominantly Black areas have relatively little access to banks and higher concentrations of AFS, each method produces a somewhat different picture of this process and its geography, calling attention to the role that such metrics play in shaping our collective understandings of racial inequality and how it to address it.

Influence of spin-off decision on financing risk: Empirical insight from Indonesian Islamic banks

Background Spin-offs play a significant role in organizational development strategies, particularly in Islamic banking, by fostering entrepreneurship, innovation, and Shariah-compliant management practices. Indonesia stands as a pioneer in implementing the dual banking system and has established a spin-off policy to foster the growth of Islamic banking. This study investigates whether the spin-off decision has a significant impact on financing risk in Indonesian Islamic banks. Methods Financing risk is measured by the non-performing financing ratio, while the spin-off decision is represented by a dummy variable equal to 1 for the post-spin-off period and 0 for the pre-spin-off period. This study utilizes data from semi-annual reports of 35 Indonesian Islamic banks and analyzes it using a dynamic panel model with the Generalized Method of Moments (GMM). Results The findings reveal that spin-offs significantly reduce financing risk, thereby enhancing the financial resilience and boosting investor appeal. Notably, this implies that Islamic banks operating as Islamic windows exhibit a higher level of financing risk compared to fully-fledged Islamic banks. Furthermore, a noteworthy pattern emerges that spin-off Islamic banks with substantial assets demonstrate greater risk in comparison to their counterparts with more modest assets. System GMM also confirmed the result. Conclusions Islamic banks can significantly reduce their financing risks by establishing independent Islamic banks, or spin-offs. Unlike Islamic windows, which are typically integrated within conventional banks and face higher risk levels, standalone Islamic banks offer greater flexibility and control over their operations.

The Impact of Cash Liquidity and Financial Leverage on The Performance of Iraqi Banks: A Comparative Study Between Islamic and Conventional Banks

Degree of financial leverage refers to the percentage of bank assets financed through debt, which banks must employ to achieve returns and cover costs, as well as the availability of cash at maturity. Therefore, the problem of the study arises in how the indicators of leverage and cash liquidity affect the indicators of financial performance in the Iraqi banking sector. That is why the study aims to use econometrics to demonstrate the impact of leverage and cash liquidity on the financial performance indicators represented by return on assets (ROA) and net profit margin (NPM) for a sample of 38 conventional and Islamic banks for the period 2010-2022. The Dynamic Panel Data methodology was used to determine the relationship between variables, which combines time series and cross-sectional, precisely the generalized moment method (GMM). Results show that financial leverage negatively and significantly impacts ROA and NPM indicators in the total sample and Islamic and conventional banks, except for the positive relationship with ROA in conventional banks. The results also showed the positive impact of cash liquidity on ROA and NPM indicators in the total sample and Islamic and conventional banks, except for its negative impact on ROA indicators in conventional banks. The results also showed the negative impact of the cash credit (cash credit to total assets ratio) on ROA and NPM indicators in the total sample and Islamic and conventional banks. Paper type: Research paper

The impact of corruption and Islamicity on bank stability and profitability: assessing the moderating effect in dual banking systems

Purpose This paper aims to examine the impact of corruption on bank stability and bank profitability separately for Islamic banks as well as conventional banks. Moreover, it also investigates whether the existence of Islamicity and corruption in the environment can moderate the Islamic banks-stability and Islamic banks-profitability relationships. Design/methodology/approach Sample of the study consists 136 banks comprising 70 Islamic and 66 conventional banks over the period 2015–2021 from nine countries with dual banking systems. Panel data fixed effect estimator with year effects is used to estimate the results. Findings Results of the study show that Islamicity is positively and corruption is negatively related to bank stability as well as bank profitability. Further, it is found that the effect of corruption is significantly different between Islamic and conventional banks, wherein conventional banks are more adversely affected than Islamic banks. However, an insignificant difference between Islamic and conventional banks is observed in the case of Islamicity. Practical implications The study provides theoretical and practical implications. On theoretical side, the study presents Islamicity as more reliable measure of religiosity based on Islamic values that can help in control of corruption by moderating corruption-bank stability nexus especially in dual banking economies which have high share of Muslim population. On practical side, the study recommends policy and operational measures for mitigating corruption aiming bank stability. Originality/value The results of this study contribute to the corruption-finance, religion-finance and dual banking literature. This study suggests that regulators and bank management must consider corruption and Islamicity while formulating their policies for better bank performance/stability.

Liquidity and credit risks during the COVID-19 pandemic: evidence from a dual banking system

Purpose The purpose of this paper is to investigate the relationship between liquidity risk and credit risk of Islamic and conventional banks in a predominantly Muslim country (Indonesia) adopting a dual banking system. Design/methodology/approach To investigate liquidity-credit risk nexus, this study used a sample of 72 Islamic and conventional banks in Indonesia for a period between 2019 Q4 and 2022 Q1. This paper used a generalized method of moments (GMM) and generalized least square (GLS) estimators. Findings This study found that there is a nonlinear (inverted U-shaped) relationship between liquidity risk and credit risk in dual banking system. Liquidity risk was found to increase credit risk if it is below the optimal threshold, and above this optimal threshold, liquidity risk begins to decrease credit risk, both before and during the pandemic. In addition, the impact of liquidity risk on credit risk is higher in Islamic banks compared to conventional banks. Originality/value This paper reinvestigates the puzzle between credit risk and liquidity risk by taking a sample of a dual banking system country and by considering the period of the COVID-19 pandemic. To the authors’ knowledge, this approach has not been addressed in prior empirical studies.

Bank liquidity creation and solvency risk with moderating role of loan concentration: a comparative study of Islamic and conventional banks in Pakistan and Malaysia

Bank liquidity creation and solvency risk with moderating role of loan concentration: a comparative study of Islamic and conventional banks in Pakistan and Malaysia

The Role of E-Satisfaction in Mediating Relationship Marketing (RM) on Banking E-Customer Loyalty

The research objective is to analyze the relationship between relationship marketing (RM) and e-customer loyalty, which is mediated by e-customer satisfaction in the banking industry in Banjarmasin. The increasingly rapid challenges of the banking world require organizations to improve their efforts to provide world-class services in order to attract and retain loyal customers. RM is the key answer to retaining loyal customers. The research was conducted in Banjarmasin with a population of 200 conventional government bank customers using a simple random sampling technique. Data were obtained from interviews with customers using a questionnaire distributed via Google Forms, and data analysis techniques using SEM AMOS 24. The research results prove that RM which consists of trust, commitment, communication, and conflict handling has a positive and significant effect on e-customer loyalty through e-customer satisfaction. This means that to further increase customer satisfaction for them to be loyal, the repair company must be able to maintain good relationships by providing a good level of trust, commitment, communication, and resolve conflicts that occur. Keywords: banking industry, commitment, communication, conflict handling, relationship marketing (RM), trust

Impact of Economic Crises on Banking Sector Performance- A Comparative Analysis of Conventional and Islamic Banks Across OIC Countries

This study investigates the impact of three significant economic crises—the Eurozone Debt Crisis (2010-2012), the COVID-19 Pandemic (2020-2021), and the Post-Pandemic Economic Recovery (2021-2022)—on the performance of conventional and Islamic banks in Organization of Islamic Cooperation (OIC) countries. Using a dataset of 4,381 observations from 34 OIC countries, panel regression techniques are employed to evaluate the influence of these crises on key financial performance metrics: Return on Shareholders' Funds (ROSF), Profit Margin (PM), Return on Total Assets (ROA), Current Ratio (CR), and Solvency Ratio (SR). The analysis reveals that while the Eurozone Debt Crisis did not significantly affect bank performance, the COVID-19 pandemic led to a notable decline in profitability but an improvement in liquidity. The results highlight that during the COVID-19 pandemic, banks faced substantial challenges in maintaining profitability, as evidenced by the significant decrease in PM. However, the improvement in CR suggests that banks enhanced their liquidity management strategies to cope with the crisis. The Post-Pandemic Economic Recovery phase brought positive changes in both profitability and liquidity, demonstrating the ability of banks to adapt and thrive as economic conditions stabilized. Macroeconomic variables, such as GDP growth and inflation, played crucial roles, with GDP growth positively affecting ROSF and inflation negatively impacting PM. These findings underscore the importance of a diversified banking system, including both conventional and Islamic banks, to enhance financial stability. Policymakers and financial regulators should consider the unique strengths of Islamic banking principles in regulatory frameworks and prioritize sound macroeconomic policies to promote stability and resilience in the banking sector. Future research should further explore the long-term impacts of economic crises on bank performance across different regions and banking models, as well as the interaction between regulatory environments and bank resilience. Keywords: Economic crises, bank performance, conventional banks, Islamic banks, OIC countries, COVID-19 pandemic, Eurozone Debt Crisis, post-pandemic recovery, financial stability, macroeconomic factors.

Analysis of the Development of Micro, Small, and Medium Enterprises (MSMEs) Before and After Receiving Murabaha Financing from PT BPRS Rahmah Hijrah Agung Kota Lhokseumawe

This study aims to analyze the development of Micro, Small, and Medium Enterprises (MSMEs) before and after receiving Murabaha financing from PT BPRS Rahmah Hijrah Agung. MSMEs play a crucial role in Indonesia's economy, significantly contributing to community development and job creation. However, they often face various challenges, particularly in accessing financing. The Murabaha financing offered by BPRS, a sharia financial institution, provides an alternative for MSMEs to obtain business capital without the burden of high interest rates and complicated requirements typically associated with conventional banks. This research examines the differences in sales turnover, order volume, market reach, product quality, business profits, employment opportunities, financial management, and competitive ability of MSMEs before and after receiving financing from BPRS. The data used in this study is sourced from MSMEs that have received Murabaha financing during the period of 2020-2023. The research findings indicate a significant improvement in various aspects studied after MSMEs received Murabaha financing. These results suggest that the sharia financing products from BPRS play a crucial role in supporting the growth of MSMEs in Indonesia, particularly in enhancing their business capacity and competitiveness in the market. This study also highlights the importance of socialization and education regarding sharia financing products to improve MSME actors' understanding of the available financing options.

The effects of diversity and inclusion on ESG performance: A comparison between Islamic and conventional banks

This study analyzes the effects of diversity, inclusion, and people development (DIP) on environmental, social, and governance (ESG) performance in Islamic and conventional banks from 2015 to 2022. Using data from Refinitiv database, it reveals that a more diverse and inclusive workplace is found to have better overall ESG performance and both pillars (environmental and social performance). This positive and significant association is more pronounced in Islamic banks than in its conventional counterpart. However, no significant effect was found on governance performance. These findings are robust to several sensitivity analyses based on some alternative measures. To the best of the authors’ knowledge, this is the first empirical study investigating the effects of diversity, inclusion, and people development on ESG performance, using multi-country data on Islamic and conventional banks.

Leveraging Fintech mobile money to expand banks’ financial services in developing countries

Mobile money consists of payments through mobile devices using Fintech platforms. Despite the accelerated mobile money adoption in developing countries, financial inclusion levels lag those in the developed world. We unveil how disruptive Fintech can foster financial inclusion, by examining a sample of nearly 70,000 observations from 70 emerging countries in 2021. Our results indicate that mobile money and its associated epidemic effects enhance the transition to deposit and credit-based financial services if institutional conditions and banks’ financial technologies are well aligned. This suggests that non-banks’ Fintechs can facilitate the uptake of financial services provided by conventional banks.

Why do microfinance institutions charge higher interest rates than banks? The role of operating costs

Microfinance interest is at the center of debate on lending to the poor because microfinance institutions (MFIs) charge significantly higher interest than conventional banks to borrowers with no creditworthiness. We contribute to the debate by documenting that MFIs spend more than banks for every dollar of lending. It occurs because the high marginal operating cost of lending is inherent to the microfinance business model - MFIs spend more than banks to mitigate high credit risks in lending to the poor. This study shed light on MFIs’ systemic limitations in poverty alleviation as envisaged in the sustainable development goals (SDGs).

Evaluation of the Fundamental Differences that Distinguish Participation Banking from Deposit Banks in Turkiye

Participation banking, or, more broadly, participation finance, continues to exist as a sector different from deposit banks in principle, purpose, and practice, developing at national and international levels. Understanding the difference between participation banking and deposit banks also provides accurate observation of the operation, processes, and results reflections. For this reason, this study examines the fundamental differences that separate participation and conventional banks from each other. Firstly, the study includes elements that differentiate participation banking conceptually and based on basic operating principles. The different structures of participation banks in pricing and balance sheets constitute the basis of the operating mechanism. For this reason, fund collection and allocation methods are explained in detail together with this structure. As a result, the participation banking sector, which continues its development as an alternative finance, was born from a different approach and has differentiated itself from deposit banks in many areas. Knowing these differences is essential in supporting the correct reading and analysis of the sector.

Pengaruh Adopsi Financial Technology Terhadap Profitabilitas Bank Umum Konvensional yang Terdaftar di Otoritas Jasa Keuangan Periode 2017-2022

This research aims to analyse the effect of financial technology (fintech) adoption on the profitability of conventional commercial banks registered with the Financial Services Authority for the period 2017-2022. This research is an associative research with a quantitative approach. The data collection method is a survey sample. The population in the study amounted to 93 banks. By using purposive sampling technique, 5 bank samples were obtained (30 observation data). Fintech services in this study are measured using Automated Teller Machine (ATM), internet banking and mobile banking. While profitability is measured using Return On Asset (ROA). The panel data analysis method in this research is multiple linear regression analysis using Eviews version 12. The results of this research indicate that Automated Teller Machine (ATM) has a positive and insignificant effect on ROA, internet banking has a negative and insignificant effect on ROA and mobile banking has a positive and significant effect on ROA.

INTERNATIONAL ISLAMIC BANKS’ POPULARITY AMIDST THE ASEAN ECONOMIC COMMUNITY: INSIGHTS FROM INDONESIA AND MALAYSIA

The establishment of the ASEAN Economic Community (AEC) aimed to achieve regional integration among all ASEAN member states, with particular emphasis on financial integration. Islamic banking is in line with the broader goals of the AEC, as an alternative financial system, helping to build a more resilient and inclusive financial system in the region. Because of this resiliency and inclusiveness, Islamic banks have been encouraged to develop into international banks in the ASEAN region through increasing their assets and earnings. This paper aims to examine the position of International Islamic banks (IIb) in the AEC under its conventional banking services: OCBC Bank from Singapore, Maybank and CIMB Bank from Malaysia. Through the analysis of banking trends, this qualitative study compares the level of popularity of those banks in Indonesia and Malaysia, the two Muslim-majority countries in ASEAN, after the initial establishment of the AEC period in 2016 to 2024. The findings indicated that the most popular Islamic financial services in Malaysia are provided by Maybank, while the most well-known Islamic financial services under IIb in Indonesia are provided by CIMB Bank. This paper provides an overview of the globalisation of IIb in ASEAN and fills a research gap on the development of IIb, particularly within the AEC.