Islamic Banking Market Research Articles

Islamic banks' merger: the case of Bank Syariah Indonesia

This paper provides a case study of the Bank Syariah Indonesia (BSI) that has been formally created on the 1st of February 2021 through mergers of three State-owned Islamic banks in Indonesia. This paper is a descriptive case study focusing on why the merger was initiated, what happens to the Indonesian Islamic banking industry after mergers, and its implication on market competition and stock prices. We use data of total assets of 34 Islamic banks in Indonesia and the weekly stock price of 4 listed Islamic banks for 18 months. By computing concentration ratio and Herfindahl index, we find that the Indonesian Islamic banking market competition decreases substantially after the merger. We also find that although the merger of BSI previously brings a positive reaction in the stock markets, the stock price of BSI consistently decreased after mergers.

Factors Affecting Customer Loyalty of Islamic Bank in Sumbawa City, Indonesia

This study aims to examine the factors affecting customer loyalty in Sumbawa city, Nusa Tenggara Barat province, Indonesia. This province become the driving factor of the Islamic bank market because it is dominated by 97% Muslims. Meanwhile, the independent factors include profit sharing, service quality, transparency, and trust. Data were collected using a questionnaire and analyzed using multiple regression methods. The results showed that service quality, transparency, and trust positively affect the customer loyalty of Islamic bank, while profit sharing have no influence. Furthermore, Muslim financial institutions are expected to use their best performance to increase customer loyalty. The practitioners and regulators can improve their performance and develop the Islamic financial industry by considering the result above.

KOLABORASI PERBANKAN SYARIAH DAN BAITUL MAAL WAT TAMWIL (BMT) DALAM PEMBERDAYAAN UMKM

Baitul Maal wat Tamwil (BMT) is one of the Islamic microfinance institutions. Existence of BMT is expected to contribute to the development of the real economy such as micro, small and medium enterprises (MSMEs), especially for businesses that do not meet all the requirements to obtain financing from Islamic banking institutions. But there are many obstacles that become barriers to BMT in order to empower the real sector, one of which is the lack of funding so that the necessary support from other parties particularly Islamic banking. Islamic banking in particular bank synergy with BMT in optimizing the real economy can be reached by a strategy in which the Islamic bank linkage program can issue indirectly financing the real sector through BMT so that the Islamic banking market penetration could reach the wider community and beneficial to growth in assets and profits while for BMT cooperation with Islamic banks will provide additional sources of funds for financing offered BMT thus also greater, which would also result in increased revenue BMT.

Opportunities and Challenges of Islamic Bank Mergers in Indonesia During a Pandemic

The presence of COVID-19 in Indonesia has had an impact on the economy, including the banking industry. However, the Shariah banking industry has not shown a positive trend. However, despite the positive trend in Shariah banking business, the penetration rate of the Indonesian Islamic banking market is still relatively small compared with traditional banking business. This led the government to decide to formulate a merger policy for the state-owned Sharia Bank, hoping that it can increase Indonesia’s market penetration. Considering the important role of Shariah banking industry in improving the national economy, this article aims to analyze the opportunities and challenges of Shariah banking merger policy. On the other hand, this policy was implemented during the COVID-19 pandemic. This article uses qualitative data analysis through descriptive methods and literature research methods. The data analysis focuses on the opportunities and challenges of the Indonesian government's Shariah Bank merger policy. Researchers use secondary data as a source for writing articles. According to the research results, the Indonesian Islamic Bank (BSI) formed after the merger provides many opportunities, such as increasing assets, expanding market penetration, and operating cost efficiency. At the same time, financing and operational risks are two major challenges that need to be paid attention to. This research helps stakeholders make decisions in the development of Islamic banking and finance.

EKSPANSI PASAR PERBANKAN SYARIAH DALAM BIDANG INDUSTRI HALAL (STUDI KASUS: BANK NAGARI SYARIAH KANTOR CABANG SOLOK)

Indonesia has the most Muslim population in the world. This encourages Indonesian people to choose to live in sharia. Sharia is very closely related to the halal industri. One area that has opportunities to develop the halal industry is Solok City, West Sumatra. Seeing the potential of the halal industry in Solok City, there is a need for optimal utilization by Islamic banking institutions, namely Bank Nagari Syariah, Branch Office of Solok. The halal industry must be developed in all sectors, but the sharia market share is not yet wide. The halal industry must be able to encourage the share of the Islamic banking market to develop a wider range of Islamic goods and services. Bank Nagari Syariah Solok Branch Office can encourage the halal industry in Solok City. With the enthusiasm of the community to run the sharia system, encouraging Bank Nagari Syariah, Solok Branch Office to provide financing to develop the halal industry.

Applying of Fatwa in the Case of Islamic Banking in Court: A Study of the Development of Islamic Banking in Indonesia

This research generally aims to examine the things that need to be considered in advancing Islamic banking. The research method used to achieve the research objectives is a qualitative research design with a research strategy through case analysis, data collection methods in interviews, and data analysis methods in analytical content. This study recommends how the Islamic banking in expanding the Islamic banking market. Based on the research, in general, there are 3 main agendas that need attention in advancing Islamic banking, namely national policy support, expansion of Islamic economic and financial institutions, and the last is education and inculcation of Islamic economic values and concepts.

THE ROLE OF SHARIA BANKING NOTARIES IN THE DEVELOPMENT OF SHARIA ECONOMIC LAW IN THE DIGITAL ERA

Notary has a strategic position in making Islamic banking contracts. This is because the Notary is responsible for the correctness of the contract construction to fulfill the terms of the agreement, as well as sharia principles. This study is intended to analyze the legal consequences that arise in the relationship between the Notary profession and the Islamic banking industry. It is important to find opportunities and challenges of Notaries in supporting the development of Islamic economics in Indonesia. This study uses a philosophical, juridical and empirical approach. The results of the analysis show that the need for a notary who has sharia competence in Islamic banking is an urgent matter. In addition, the opportunities and challenges for sharia-compliant notaries are as great. This is due to the fact that the potential of the Islamic banking market is still very large, but there are also many technological developments with various problems. For this reason, Islamic competent notaries need to be confident that the conventional transaction concept is the design of Allah SWT, the Creator of man, so that it needs to be studied, practiced, disseminated and oriented towards finding solutions if there are still obstacles in its implementation

An Analytical Review of the Influence of Regulatory and Supervisory Bodies on the Business of the Islamic Financial Institutions (IFIs) in Pakistan

Islamic financial market in Pakistan comprises Islamic banking, Takaful and Islamic capital market. It is regulated and supervised by the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP). Despite the regulatory and supervisory mechanism crafted by these authorities, there are other institutions such as the Council of Islamic Ideology (CII), Federal Shariat Court (FSC) and international institutions such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB) which intervene and influence the Islamic banking practices. Based on an analytical approach, the current study found an overlapping situation in the authority exercised by these bodies over the business of the IFIs in Pakistan. Hence, a distinctive regulatory authority based on an adequate legal foundation should be created to watch over the business of the IFIs in Pakistan. The supreme authority can be conferred to the Shariah Advisory Committee (SAC) of the SBP or to a separate body in the current judicial infrastructure of the country in order to overview, harmonize and resolve the issues related to the business of the IFIs.

THE PRE-MERGER EFFICIENCY OF BANKS: EVIDENCE IN INDONESIA STATE-OWNED ISLAMIC BANKS

In an effort to improve the development of the sharia economy in Indonesia, the Ministry of State-Owned Enterprises (BUMN) has decided to carry out a merger of BRI Syariah, Bank Syariah Mandiri, and BNI Syariah becomes Bank Syariah Indonesia. This merger plan is implemented to increase the share of the Islamic banking market so that it can compete with conventional banking. In order to be able to compete with conventional banking, Islamic banks must be able to have efficient performance and high productivity. This research is a quantitative study to analyze and compare the performance efficiency of BRISyariah, Bank Syariah Mandiri, and BNISyariah with the performance efficiency of ten conventional banks for the 2016-2019 periods using the Data Envelopment Analysis (DEA) method with five analysis models to obtain various considerations in preparing the merger plan. The estimation results show that if the three Islamic banks are merged, they will have inefficient performance with an efficiency score of 0.86. On the other hand, if only two Islamic banks are merged, namely BNISyariah and BRISyariah, it will produce perfect efficiency values.

KONDISI EKONOMI SYARIAH DI INDONESIA PASCA MERGERNYA BANK SYARIAH BUMN

Indonesia has the largest Muslim population in the world. With this amount, of course, it should be a capital for economic strength. However, as of November 2020, data released by the Financial Services Authority put the Islamic banking market share at 6.33%. Efforts to merge the three state-owned Sharia banks into Indonesian Sharia Banks are expected to increase the penetration of the sharia economy in Indonesia, which is still far behind when compared to conventional domestic economic movements and Islamic financial transactions in other countries. This research will describe the extent of the sharia economic conditions in Indonesia after the merger of state-owned sharia banks into BSI. This study uses a qualitative method with a type of literature review research which is obtained from various authentic sources such as books, articles, journals and trusted websites. There was a 2.7% increase in the market share of Islamic banks after the merger. This increase when compared to the existing potential and the market is still very small. However, it is hoped that this impact will continue to increase over time, especially as capital support for various financial sectors and the halal industry in the country.

The Role of the Government in the Development of Indonesian Sharia Banking

The growth of the Sharia financial industry in Indonesia is quite slow, this is due to the lack of the government's role in helping develop the Islamic finance industry, even though the potential of the Islamic banking market in Indonesia is actually very large. Therefore, the purpose of this study is to discuss the issue of whether the economic values of Sharia are in accordance with Indonesian philosophy and values, so that the Sharia Industry is able to develop fundamentally in Indonesian society, as well as how the role of the government is to provide a strong basis in developing the Islamic Banking Industry in Indonesia. Indonesia. Because the progress of Islamic banking as a financial industry determines its development in the economy in Indonesia. This study uses a normative research method, where research is focused on legal norms or norms. In the development of Islamic banking by the government, it involves several institutions as the means. The scope of cooperation coordination is broad in order to make Indonesia the center of Islamic economics and finance Some of these institutions include: Bank Indonesia, the Financial Services Authority and the Sharia Supervisory Board. Each institution carries out its role in order to achieve the objectives of developing Islamic banking which have been arranged in a development management.

PELUANG DAN TANTANGAN MERGER BANK SYARIAH MILIK NEGARA DI INDONESIA PADA MASA PANDEMI COVID-19

The existence of COVID-19 in Indonesia had an impact on economy, including banking sector. However, sharia banking sector didn’t show a positive trend. However, even though sharia banking shows a positive trend, penetration rate of Islamic banking market in Indonesia is still relatively small when compared to conventional banking. That has made government decide to make a merger policy in state-owned sharia banking in hope that it can increase market penetration in Indonesia. This article is written to analyze about opportunities and challenges of merger policy for sharia banking considering the large role of sharia banking in improving country's economy. On the other hand, this policy was implemented in the midst of the COVID-19 pandemic. This article uses qualitative data analysis with descriptive methods and through a literature study approach. The data analysis focuses on the opportunities and challenges of the sharia banking merger policy by Indonesian’s government. Researchers use secondary data as a source for making articles. Based on research results, the formation of Bank Syariah Indonesia (BSI) as a result of merger provides many opportunities such as increasing assets, expanding market penetration, and operating cost efficiency. Meanwhile, financing and operational risk are two big challenges that need attention. This study contributes as inputs for stakeholders’ decisions in developing Islamic bank and finance

Analisis Peranan Strategi Marketing Funding Dalam Peningkatan Jumlah Nasabah dan Dana Pihak Ketiga:

Indonesia was ranked first in the global Islamic financial market at the 2019 Sharia Economic and Financial Research Forum (FREKS), where the market share in the Islamic banking sector had reached 6.01% and the OJK is targeting in 2023 the Islamic banking market share of 15%, wrong one indicator of improvement is by increasing the number of accounts and the amount of Third Party Funds (TPF). The purpose of this study is to determine what strategies are used by the Marketing Funding of the BPRS Harta Insan Karimah Cikarang Branch to increase the number of customers or accounts and the amount of TPF. Then what is the role of the strategy used by Marketing Funding in increasing the number of customers and the number of deposits.
 The pick-up strategy implemented by BPRS Harta Insan Karimah Cikarang branch is an excellent service provided to each customer, this strategy is considered to provide convenience to customers in savings and deposit products because the transaction can be done at home and the Marketing Funding team will visit the customer's house. If the strategy is to pick-up properly, the target number of customers will be achieved and theoretically the amount of deposits will increase as well. This study uses a qualitative method with a descriptive approach, so that the researcher will explain or describe the results of the study in verbal or descriptive form so that it is easy to understand. The research method used in data collection includes interviews, observation, documentation and literature study.
 The results showed that the strategy used by marketing funding was the pick-up strategy, where deposits, withdrawals and account opening could be done at the customer's house with prior confirmation with the Marketing Funding team so that the interaction was built between the two. The role of this strategy was significant in increasing the number of customers in 2017 reaching 11.11% and in the following year the number of customers increased by 10.79%. However, the role of the pick-ball strategy is not significant in increasing TPF, in other words the increase in the number of customers does not mean that TPF will increase as well, seen in 2015 of 10.79%, and the next 2 years decreased consecutively, namely -21.77% and -9.53%, in 2018 the amount of TPF increased again by 14.65%. Other alternative strategies that can be implemented by BPRS Harta Insan Karimah Cikarang Branch are maximizing social media as a means of advertising, recruiting SDI Marketing Funding team, socializing to guardians of affiliated school students, giving souvenirs to customers who can refer BPRS HIK, sponsoring the community agenda or institutions, as well as Improving the schedule for collecting funds and improving the information system.

How to Attract Millennials? Indonesian Sharia Banking Opportunities

Age is often one of the factors determining the target market of a business. By knowing the potential customer's age, we determine what kind of marketing strategy should be proposed. Along with the times, many business people are eyeing millennials because of their consumptive lifestyle. It is not surprising that millenials have now dominated consumer databases. The facts have not skipped the attention of the sharia banking sector in Indonesia. This study aims to construct the opportunity for Bank Syariah Indonesia to grasp millennials as a market share. This study uses field research with qualitative methods, carried out by descriptive analysis. The data sourced from interviews and questionnaires. Islamic banks' opportunities to attract millennials include familiarity with Islamic banking products and contracts, momentum of Hijrah, digitizing Islamic banking, and unique segmentation. These opportunities can be taken into consideration in expanding the Islamic banking market in Indonesia.

Islamic Banks’ Stability: Full-Fledged vs Islamic Windows

Research aims: This paper investigates whether Islamic windows have better stability than full-fledged Islamic banks.Design/Methodology/Approach: A sample of 14 Islamic banks and 19 Islamic windows banks in Indonesia from 2013 to 2018 was used in this study. Both ordinary least squares and panel fixed effects were employed to examine the stability of both Islamic banks’ types.Research findings: Our empirical result suggested that full-fledged Islamic banks were less stable than their Islamic windows counterparts. This result remained consistent after running the model with different estimators and conducting various robustness tests.Theoretical contribution/Originality: Our result implies that Islamic windows could enjoy their market position to maintain stability without converting themselves into full-fledged Islamic banks because the Islamic banking market's current condition is highly competitive.Practitioner/Policy implication: Our empirical evidence supports the Indonesian governments' policy in converting Islamic windows banks into full-fledged Islamic banks if the market's competitive condition is well monitored by the regulators.Research limitation/Implication: This research result is limited only to the Indonesian setting and can be different if the analysis is taken using a sample from other countries.

Role of Remuneration and Board Characteristics for Bank Performance. A Study Based on Conventional and Islamic Banking Comparison

The standing study tried to analyze the role of board remuneration and board characteristics on the comparative performance of commercial and Islamic banking in Pakistan for the duration of 2006 to 2017. The data was collected in panel form for five leading conventional banks and five Islamic banks. Panel estimation techniques like fixed, random and pooled Ordinary least square were applied after conforming Hausman specification test and LM test. Using ROE and ROA, found that Director’s Remuneration is positively and significantly affecting banking performance while Account holder’s investment is positively and significantly affecting bank’s performance for conventional banks only and Social contribution is significantly and positively affecting Islamic banking performance in Pakistan. Using Tobin’s Q as a proxy of market performance indicates remuneration is negatively affecting conventional banking performance while Islamic banking market performance is negatively and significantly affected by board’s composition and positively and significantly affected by social contribution. The policymakers should enhance the remuneration of their directors so as to boost their bank’s performance. Moreover, the management of conventional banks should also consider the account holder’s investment to enhance the accounting performance of their banks. The policymaker in Islamic banks can increase their performance (accounting as well as market) by enhancing the social contribution like Zakat. The discoveries of this comparative study are restricted to the banking sector of Pakistan.

Evaluating the influence of Different Regulatory and Supervisory Bodies on the Business of Islamic Financial Institutions in Pakistan

Islamic financial market in Pakistan comprises of Islamic banking, Takaful and Islamic capital market which has been regulated and supervised by State Bank of Pakistan and Securities and Exchange Commission of Pakistan.Despite the regulatory and supervisory mechanism crafted by these authorities, there are other institutions i.e., The Council of Islamic Ideology, Federal Shariat Court and international institutions such as AAOIFI and IFSB which intervene and influence this practice. Based on descriptive analytical approach, the study finds that there is an overlapping situation in the authority over the business of IFIs. Therefore, it suggests that the current regulatory arrangement needs a distinctive sole authority over the business of Islamic financial institutions in Pakistan supported with adequate legal foundation.

Competitiveness and Market Concentration of Islamic Banking Industry: A Comparison Study between Indonesia and Malaysia

Financial integration in the ASEAN Economic community (AEC) by 2020 forces Islamic banks in Indonesia and Malaysia to be more competitive and have market power domestically and internationally to ensure business sustainability and increase assets rapidly in order to boost market share of Islamic banking in Indonesia and Malaysia. Islamic bank market competitiveness and power will determine the returns, investment, asset and trust of Islamic banks. The study uses data from 10 Islamic banks in Indonesia and Malaysia. The result confirmed that Islamic banking in Indonesia are characterized by the monopolize industry and Islamic bank in Malaysia are characterized by oligopoly Industry.Â

IDENTIFYING THE FACTORS DETERMINING OF MUSLIMS’ INTENTION TO ADOPT ISLAMIC BANKING IN THE LOCAL REGION: RELIGIOSITY AS MODERATING VARIABLE

Purpose of the study: This paper investigates factors that influence the Muslims’ intention to adopt Islamic banking and to examine whether religiosity moderates the effect of those factors toward the Muslim's intention to adopt Islamic banking in South Sumatera.
 Methodology: Primary data collected from six towns/districts in South Sumatera are obtained through questionnaires with the total respondents of 300. Using multiple regression analysis, we test whether attitude, social influence, bank reputation, and compliance on Islamic principles can affect the Muslims’ intention in using Islamic banking.
 Main Findings: We further crosscheck our findings through an interview with some of the respondents. We find that attitude, reputation, and compliance affect the intention to adopt Islamic banking significantly, whereas social influence is found to be insignificant. Our further finding explains that religiosity, which is represented by the dimension of Syariah and Ahlaq, cannot moderate the effect of an independent variable on the dependent variable.
 Implications of this study: This implies that in increasing Islamic bank market share, managers of Islamic banks and also government cannot solely depend on religious factors. Our findings give insights to practitioners and regulators on what factors can affect Muslims’ intention to use Islamic banking.
 Novelty/Originality of this study: This study contributes as it extends the existing literature, any factors influencing the interest and intention of the Muslim community to adopt sharia banking as their banking activities. Some studies look at the direct effect of religiosity toward Islamic banking, however, it is different from previous studies because we put religiosity as a moderating variable.

PERAN TATA KELOLA PERBANKAN SYARIAH TERHADAP RISIKO PERBANKAN SYARIAH DI INDONESIA

The increased penetration of the Islamic banking market in Indonesia is one of the highest in ASIA. The enhancement in the market has an impact on increasing the risk complexity of Islamic banking business activities. Sharia banking risks need to be managed and controlled properly in order to prevent banking failures. Bank governance (corporate governance) is indicated as one of the things that plays an important role in determining the level of risk faced by banks. The purpose of this study is to examine whether good governance can reduce the risk of Islamic banking. This study uses the population of Islamic banking from 2014-2018. The samples obtained in this study are 58 Islamic banks. The results showed that good governance can reduce the banking risk. In addition, the testing using control variables showed that the greater the size of the banking system that is proxied by the total assets, the higher the risk received by banks both from credit risk to investment risk.