Conventional Banks Research Articles

How do the capital structure and adjustment speed of Islamic banks differ from those of conventional banks? Evidence from the GCC region

This study investigates the leverage ratios and speed of adjustment of Islamic and conventional banks over the years 2011–2022. The study focuses on the GCC markets, where most Islamic banks’ assets are located, accounting for 60% of the global Islamic banking sector. After using a wide set of methodological approaches, the findings of this study show that GCC Islamic banks exhibit higher leverage ratios than their conventional counterparts. Further, we also find that both Islamic and conventional banks set optimal target leverage ratios. However, the speed of adjustment toward the mentioned target is significantly faster for Islamic banks compared to conventional banks. This faster adjustment speed for GCC Islamic banks is justified by the massive development of Islamic finance and the availability of Shariah-compliant financial assets in the GCC region, which decreases the adjustment cost for Islamic banks. These findings provide significant implications for policymakers, regulators, and bank executives. At best, this study offers the first empirical evidence demonstrating the faster adjustment speed for Islamic banks’ capital structure than their conventional counterparts.

Strategi Kualitas Pelayanan dalam Membentuk Keputusan Nasabah Menggunakan Produk Tabungan Wadiah di BSI KCP Probolinggo Kraksaan

This study aims to understand the service strategy of Bank Syariah Indonesia (BSI) KCP Probolinggo Kraksaan in increasing customer satisfaction and decisions, especially on Easy Wadiah savings products. The approach used is qualitative phenomenology with interview, observation, and documentation methods to identify the main themes in the bank's service strategy. Data triangulation is applied to ensure the validity of the findings. The results of the study indicate that optimal service contributes significantly to increasing the number of customers. Ease of transaction process and responsiveness to customer needs build trust that drives customer decisions to choose sharia banking products. In addition, the Easy Wadiah savings marketing strategy applies the 4P and 7P marketing mix in various BSI branches. Product and price elements are the main attractions for customers. Digital-based marketing strategies through social media such as WhatsApp Business, Instagram, and the BSI Mobile Banking application have proven effective in increasing customer satisfaction. With competitive services, BSI KCP Probolinggo Kraksaan is able to compete with conventional banks and attract more customers. In conclusion, BSI's success in increasing the number of customers is highly dependent on optimal service strategies and innovative digital marketing.

Advancing Financial Inclusion through FinTech: A Regulatory Insight into Emerging Industry Practices

Although the global shift toward digitalization is accelerating, many individuals in the Middle East and North Africa (MENA) region still face restricted access to basic financial services. Nonetheless, the rise of financial technology (FinTech) is beginning to challenge traditional financial frameworks and expand reach. This study explores the impact of FinTech on promoting financial inclusion across the MENA region in the context of ongoing digital evolution. It examines how new technological advancements are reshaping the delivery of conventional banking and financial services. Furthermore, it assesses the contribution of key FinTech solutions—such as digital payment systems, online lending platforms, InsurTech, and digital wealth management—in enhancing financial inclusion within Gulf Cooperation Council (GCC) nations. A mixed-methods research design, incorporating an extensive review of existing literature and comparative case analyses from both developed and emerging economies, is employed. Results show that FinTech has made financial services more accessible to previously overlooked groups, including women, youth, and small and medium enterprises (SMEs). However, additional strategies are necessary to overcome persistent barriers faced by marginalized populations. The study concludes by advocating for a regulatory framework that balances innovation with consumer safeguards and highlights the importance of collaborative efforts to reinforce the role of technology in improving livelihoods

The psychology of the afterlife and Islamic financing adoption

PurposeDrawing on the protection motivation theory (PMT) approach, this study aims to establish the relationships between afterlife fear and hope expectations and the intention to adopt Islamic financing products among Muslim consumers. It also examines the mediating roles of threats and coping mechanisms in these linkages.Design/methodology/approachVia a questionnaire survey, we collected responses from 258 working-class Muslims who have some experience in both conventional and Islamic banking in Malaysia. The study’s hypotheses are analyzed using partial least squares structural equation modeling (PLS-SEM).FindingsThe results reveal that afterlife hope expectation positively influences consumers' intention to adopt Islamic financing, both directly and indirectly through the mediating roles of response efficacy and self-efficacy. Conversely, from the perspective of threat appraisal, the pathway to intention is influenced by rule-breaking ability. Perceived severity, rather than perceived vulnerability, mediates the relationship between afterlife fear expectation and rule-breaking ability.Research limitations/implicationsDriven by the psychological aspects of hope and fear, this research offers a comprehensive empirical model that predicts Muslims’ consumer behavior from the theoretical lens of PMT. As Islam forbids usury (riba), adherence to religious-based obligations and the Sharia law serve as the integral factors that influence their final consumption decision.Practical implicationsIslamic banks may devise effective acquisition and retention strategies by distinguishing psychographic-based market segments characterized by utilitarian, economic and religious-based attitudes. By infusing subtle religious messaging into marketing campaigns, non-subscribing Muslim consumers can be spiritually encouraged to use Sharia-compliant financing products and existing customers can be motivated to continue utilizing them.Originality/valueOur study advances the stream of research on the afterlife fear and hope expectations – Islamic financing adoption linkage as well as identifying unique mediation pathways that haven’t been explored in consumer psychology and financial marketing studies.

Strategic fit of potential M&As between dual banks and conventional banks: Does Islamic banking matter?

Strategic fit of potential M&As between dual banks and conventional banks: Does Islamic banking matter?

SEPARATION OF ISLAMIC BANKS FROM CONVENTIONAL BANK OWNERSHIP TO INCREASE MARKET SHARE OF ISLAMIC BANKING IN INDONESIA

The market share of Islamic banking in Indonesia is still low. In Indonesia, most Islamic banks are owned by their parent conventional banks. As subsidiaries of conventional banks, the profits earned by Islamic banks are attributed to their parent conventional banks, thereby increasing the overall revenue and profitability of the parent bank. The main objective of this study is to evaluate the impact of conventional banks' majority ownership of Islamic banks on the development of the Islamic banking industry in Indonesia. The study’s objective is to encourage the government and banking regulators in Indonesia to increase the market share of Islamic banking. This research was conducted using a descriptive qualitative approach. The population is Islamic banks and parent conventional banks of Islamic banks in Indonesia, with samples of Bank Syariah Indonesia (BSI) and Bank Mandiri. The instruments used are the financial statements of the Islamic banks sampled and the financial statements of their parent conventional banks. Data analysis was conducted on BSI profit earned and the recognition of the profit earned in the financial statements of Bank Mandiri. In 2022, BSI's profit contributed 50,5% of the total contribution of all Bank Mandiri subsidiaries. This will undoubtedly impact the growth of Bank Mandiri and can increase the market share of conventional banks in Indonesia. There needs to be a policy made by the government and the regulator, namely the Financial Services Authority (OJK), that there is no majority ownership of Islamic banks by conventional banks or even the separation of Islamic banks from conventional parent banks. The government and OJK should be actively involved in formulating policies and regulations that support the separation of guidelines and rules that support this separation to increase the market share of Islamic banking in Indonesia.

Do ESG Performance Improve Bank Stability: Comparative Analysis Islamic vs Conventional Bank

This research examines the impact of ESG on the stability of conventional banks and Islamic banks in Indonesia and Malaysia. Using panel data from 140 conventional banks and 27 Islamic banks from 2014-2023, we found that ESG performance has a significantly positive impact on bank stability. The research results indicate that ESG significantly affects the stability of both Islamic and conventional banks. Furthermore, the research results also indicate that the environmental pillar has a more significant impact on the stability of conventional banks and the social pillar has a more significant impact on the stability of Islamic banks. The results of this research can be utilized by stakeholders to pay more attention to ESG performance as an effort to maintain the long-term stability of both conventional and Islamic banks.

The Effect of Board Size, Audit Committee, and Board Gender Diversity on the Disclosure of Green Banking Practices

This study aims to analyze the effect of board size, audit committee, and board gender diversity on green banking disclosure practices at conventional commercial banks listed on the IDX for the 2021-2023 period. The population in this study amounted to 47 banking sector companies during the 2021-2023 period. The sample selection technique used was purposive sampling with certain criteria, so that 27 samples were obtained that needed to be observed. This study uses content analysis to assess green banking practices, namely through annual reports and sustainability reports published by banks. The causal relationship between board size, audit committee, and board gender diversity on the disclosure of green banking practices was tested using multiple linear regression analysis. The results of this study found the influence of the board size on the disclosure of green banking practices, but the presence of an audit committee and board gender diversity has no influence. The results also show that all independent variables simultaneously affect the disclosure of green banking

Determinants of Funding Decisions in Micro, Small, and Medium Enterprises (MSMEs): A Systematic Literature Review

This study aims to analyze the factors that influence MSME funding decisions through a systematic literature review (SLR) of empirical studies in the last 10 years. The results of the study indicate that MSME funding decisions are influenced by internal and external factors from the MSME perspective, namely owner characteristics, business size, financial literacy, access to funding, interest rates and service quality. Based on the perspective of financial institutions, internal factors consist of DPK, NPF, FDR, while external factors include collateral, profitability and inflation. Fintech also influences funding decisions by opening access for MSMEs that are not accessible to conventional banks with a fast and flexible process. By understanding these factors, the government can formulate effective strategies to support the growth and sustainability of MSMEs, which will contribute to more inclusive economic development

The Influence of Credit Risk Level, Liquidity Risk on Profitability with Operational Efficiency Level as an Intervening Variable (Case Study on Conventional Commercial Banks KBMI 3 and KBMI 4 Listed on the IDX in 2021-2024)

The goal of this study is to assess the impact of credit risk and liquidity risk on profitability with the level of operational efficiency as an intervening variable, at Conventional Commercial Banks Bank Group Based on Core Capital3 and Bank Group Based on Core Capital4 listed on the IDX in 2021-2024. Data obtained from secondary data from annual reports of financial institution companies listed in 2021-2024. This research method uses the SEM-PLS 4.0 analysis technique. This study's hypothesis is based on past research and a variety of supporting theories. The findings of this study show that credit risk (gross and net NPL) has no meaningful effect on profitability. Credit risk (gross NPL) has a positive and large impact on operational efficiency, whereas net NPL has no meaningful effect. Liquidity risk has no substantial effect on profitability, but it does have a positive and considerable impact on operational efficiency. The level of operational efficiency has a negative and significant effect on profitability. The level of operational efficiency has a negative and considerable mediating influence on profitability of both credit risk (gross NPL) and liquidity risk. However, operational efficiency has no substantial effect on profitability when compared to credit risk (net NPL).

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) to overcome potential endogeneity issues that might bias the results. 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. Therefore, spin-off policies for Islamic banks appear to be a viable strategy, as independence fosters enhanced risk sensitivity.

Impact of Globalisation, AI Adoption, and FinTech Integration on Banking Sector Performance and Customer Satisfaction in Post-COVID Pakistan

This study aims to investigate the combined impact of Globalisation Index (GI), AI Adoption Rate (AIA), and FinTech Integration (FI) on the financial performance and customer satisfaction of major banks in post-COVID Pakistan. Grounded in Globalisation Theory, Technological Adoption Theory, and Financial Resilience Theory. Quantitative with panel data regression analysis. Major Banks in Pakistan over the period 2010-2023, including both Islamic and conventional banks. Secondary data from annual reports, globalisation indices, and regulatory reports. Descriptive statistics, normality tests, correlation analysis, heteroscedasticity tests, and panel data regression. Findings indicate that GI, AIA, and FI significantly influence both financial performance and customer satisfaction. Specifically, FI showed the strongest positive impact, followed by AIA and GI. The models for financial performance and customer satisfaction achieved R² values of 0.648 and 0.715 respectively, indicating substantial explanatory power. This study demonstrates that enhancing globalisation efforts, adopting AI technologies, and integrating FinTech solutions are crucial strategies for improving financial performance and customer satisfaction in Pakistan’s banking sector post-COVID. This study integrates theories of globalisation, technological adoption, and financial resilience to offer a comprehensive analysis of contemporary banking trends in Pakistan.

A Comprehensive Review of Real-Time Blood Inventory Management Systems

Abstract - During medical emergencies, the prompt supply of blood can be the key to survival. Conventional blood banking systems usually suffer from issues like manual inventory management, ineffective donor recruitment, and lack of interoperability among hospitals and blood banks. This document presents DONARNET, an intelligent real-time blood stock management system that closes the gap among hospitals, blood banks, and volunteer donors. Principal innovations are geolocation - based donor filtering and notification, real-time inventory visibility, and a First-In-First-Out (FIFO) policy to reduce wastage of blood. The system also ensures scalability and improves responsiveness through mobile and web access, making it a comprehensive solution for modern healthcare infrastructure. Keywords—Blood Bank Management, Real-Time Inventory, Donor Authentication, Blood Compatibility, Automated Notifications, FIFO Stock Management.

The Influence of Credit Risk and Liquidity with Guarantee Interest Rate as a Moderator on the Financial Performance of Conventional and Islamic Rural Banks (BPR and BPRS)

This study aims to evaluate the financial performance (profitability), credit risk, and liquidity of BPR and BPRS before and during the pandemic. The study focuses on analyzing the impact of credit risk and liquidity on profitability and the moderating effect of the guarantee interest rate on liquidity in relation to the financial performance of BPR and BPRS. Design/methodology/approach: A total sample of 1,349 BPR and 153 BPRS across Indonesia was analyzed using Stata software. The research employed quantitative methods to test the proposed hypotheses regarding the relationships between credit risk, liquidity, and profitability, while assessing the moderating role of the guarantee interest rate. Research Findings: The findings show that NPL/NPF significantly affects the financial performance (ROA) of BPR and BPRS, with an increase in NPL/NPF negatively impacting profitability. Additionally, the guarantee interest rate strengthens the positive relationship between LDR/FDR and ROA, indicating that higher interest rates improve fund management and financial performance. Theoretical Contribution/Originality: This study contributes to the literature by highlighting the significant role of credit risk management and the importance of interest rate moderation in enhancing the financial stability and profitability of BPR and BPRS. It also emphasizes the differences in risk management approaches between BPR and BPRS, especially during economic downturns like the pandemic.

DIGITAL TRANSFORMATION AND EFFICIENCY: EVIDENCE FROM INDONESIAN BANKS

Recent studies suggest that digitalization does not uniformly enhance bank efficiency. A critical factor influencing this outcome is the size of the institution undergoing digital transformation (DT). Small and medium-sized commercial banks often encounter challenges such as limited financial resources and difficulty in adapting digital solutions that align with market conditions, thereby leading to DT failures. This study investigates the impact of DT on bank efficiency. Our analysis focuses on a sample of conventional Indonesian banks from 2015 to 2023. We also explore how digitalization affects the efficiency of both large and small banks. Regression analysis reveals nuanced findings. In large banks, the coefficient of DT2 does not significantly affect performance, whereas in small and medium-sized banks, it exhibits a statistically significant negative relationship. This suggests that digitalization influences bank performance non-linearly, posing different implications for banks of varying sizes. This study contributes to understanding the heterogeneous impacts of DT on bank efficiency, offering insights relevant not only to the Indonesian banking sector, but also to other emerging markets undertaking similar DT strategies.

Determinants and Forecasting of Islamic and conventional Banks Profitability in Pakistan by using Logistic Regression

Banks’ profitability has been an essential consideration for economists, investors, and researchers. It serves as a benchmark for the banking industry economy. In the previous literature, it was observed that an internal factor of Pakistan banks’ profitability i.e. non-interest income was not included. This study examined in addition to other micro and macro factors, the non-interest income of banks’ profitability in Pakistan. Data for the period 2007 to 2016 was obtained from State bank Pakistan and the Finance Division of Pakistan. Bank’s profitability was measured by the return on assets taken as the dependent variable. An unusual technique for such studies, logistic regression was applied. Although, by default return on asset is a continuous variable it was converted to categorical by assigning “1” for profitable banks and “0” for the non-profitable bank. Results indicated that bank size, operating efficiency, and interest ratio have significant effects on the profitability of banks. Interest ratio and operating efficiency have a negative relationship with return on asset and the size has a positive effect on return on asset. It was found that non-interest income has no significant effect on banks’ profitability.

Rethinking ‘Interest’ in Islamic Finance: A Critique of the Method of Fatwâ MUI and Its Legitimacy in Indonesia

This article explores the concept of 'interest' as a fundamental issue in Islamic financial practice in Indonesia, with a particular focus on the fatwa issued by the Indonesian Ulema Council (MUI) No. 1/2004, which formalized the prohibition of interest in Islamic financial institutions as harâm activity. The fatwa has sparked criticism and debate among academics and scholars questioning its legitimacy. Also, the method of deriving laws is weak and less affirmative in addressing the socio-economic conditions of the Indonesian people who are used to conventional banks and have not recently intersected with Islamic banks, through a qualitative-normative approach and the collection of primary data from various academic sources that discuss the fatwâ. It was found that the MUI fatwâ relied heavily on normative postulates and used qiyâs, an analogical reasoning method based on legal 'illat (adequate cause), as its primary ijtihâd approach. However, the MUI's methods overlook the socio-economic context. Critical political indications specific to Indonesia can inform a more comprehensive and contextually relevant basis for expressing interest as harâm in financial institutions. The recommendation in this study is the need to review and reassess the arguments underlying the fatwa to align it more closely with the reality of the profit-taking system in financial institutions that is common to the national and global community.

The Impact of Sustainability Report Disclosure on Firm Value: Evidence from Indonesia’s Largest Private Conventional Banks (2019-2023)

Sustainability reporting has gained significant importance in the financial sector as it enhances transparency, accountability, and corporate social responsibility. In Indonesia, the implementation of Financial Services Authority Regulation (POJK No. 51/POJK.03/2017) has mandated financial institutions to disclose sustainability-related information. However, the impact of these disclosures on firm value remains debatable. This study examines the relationship between sustainability report disclosure and firm value in six major Indonesian private banks from 2019 to 2023. Using Agency Theory and the Triple Bottom Line framework, this research assesses the effect of economic, environmental, and social disclosure on firm valuation. Employing panel data regression analysis, the findings reveal that social disclosures have a significant positive impact on firm value, while economic disclosures exhibit a weaker but positive effect. Meanwhile, environmental disclosures do not show a significant impact, suggesting that investors in Indonesia's banking sector may not yet fully integrate environmental concerns into their valuation models. This study provides insights for banking executives, regulators, and investors on the importance of sustainability transparency and its role in enhancing corporate value.

Climate Risk and Bank Profitability in the MENA Region: The Moderating Role of Financial Development

This study pursues three key objectives: first, to examine the impact of climate risk on bank profitability, measured by return on assets (ROA) and return on equity (ROE); second, to assess the role of financial development (FD) in influencing bank profitability; and third, to determine whether financial development moderates the relationship between climate risk and bank profitability. Using a sample of 68 conventional banks in the MENA region (2005-2020) and employing the SGMM methodology, we split the MENA region in two sub-regions. The first block contains the Gulf Cooperation Council (GCC) countries with a sample of 33 banks and, the second covers the non-GCC countries with a sample of 35 banks. Results reveal that climate risk reduces bank profitability, while financial development enhances it. Additionally, financial development mitigates the negative effect of climate risk on profitability. However, sub-sample results differ: for GCC banks, FD shows a positive impact, climate risk a negative one, and their interaction a positive effect, whereas for non-GCC banks, climate risk and its interaction with FD are insignificant.

The Influence of Internal and External Factors of Banks on the Profitability of Regional Development Banks in Indonesia

Banking is a crucial component of the financial sector, serving as the backbone of a country's economy. It functions as an intermediary institution that gathers funds from surplus parties and distributes them to those in need. As a business entity, banks inherently aim to generate profits while fulfilling their roles as financial intermediaries and development agents (Garr & Awadzie, 2021). This study aims to analyze the impact of internal factors—such as credit distribution, capital participation, liquidity, fee-based income, and bank size—as well as external factors like GDP on the profitability (ROA) of conventional Regional Development Banks (BPD) in Indonesia from 2013 to 2023. Utilizing panel data analysis with 23 samples, the findings reveal that credit distribution, fee-based income, and GDP do not significantly affect profitability. In contrast, capital participation and liquidity have a significant positive impact, whereas bank size has a significantly negative effect on profitability.