Banks In Malaysia Research Articles

Comparative Analysis of Bank Health Levels towards the Profitability of Sharia Banks in Indonesia and Malaysia

Aims: To analyze and compare the effect of bank health on profitability in Islamic banks in Indonesia and Malaysia.
 Study design: The research method used is quantitative descriptive research.
 Place and Duration of Study: The sampling technique used was purposive sampling. The study was conducted on Sharia Banks registered with the Indonesian Financial Services Authority and Sharia Banks listed on the Malaysia Stock Exchange with a research period of four years, from 2016-2019.
 Methodology: The type of data obtained in this study is documentary data. The source of data used in this study is secondary data, namely data on audited financial statements of Islamic banks in Indonesia and Malaysia which were taken through the websites www.idx.co.id and www.bursamalaysia.com in 2016-2019. Data analysis was performed using multiple regression analysis using IBM SPSS to see the effect of the independent variables on the dependent variable, including the Descriptive Statistics Test and Multiple Regression Test.
 Results: The results of this study indicate that in Islamic banks in Indonesia and Islamic banks in Malaysia there is no difference in the results of testing the effect of NPF on ROA, namely NPF is not significant in affecting profitability as proxied by ROA. However, the results of testing the effect of OER on ROA are different in the two samples. In the sample of Islamic banks in Indonesia, OER has a significant effect on ROA. While OER is not significant in influencing ROA in the sample of Islamic banks in Malaysia. Testing the effect of CAR on ROA also shows results that are not different between the samples of Islamic banks in Indonesia and Islamic banks in Malaysia, namely CAR has a significant effect on ROA. In terms of soundness level analysis, Islamic banks in Malaysia tend to be superior in the perspective of Risk Profile (NPF) and Earnings (OER), where most Islamic banks in Malaysia get the title of Very Healthy compared to Islamic banks in Indonesia. While in the perspective of Capital (CAR), both samples get the same predicate, namely Very Healthy.
 Conclusion: The health level of Islamic banks in Malaysia is superior compared to the health level of Islamic bank in Indonesia.

A proposed centralized Shariah governance framework for Islamic banks in Bangladesh

PurposeThe purpose of this study is to propose a centralized Shariah governance framework (CSGF) for the Islamic banks and Shariah governance in Bangladesh as such, the existence and practices of the Shariah governance framework (SGF) are decentralized and diversified.Design/methodology/approachThe paper implements a qualitative case study approach to develop a CSGF for the Islamic banks in Bangladesh. The data has been collected from 17 respondents through semi-structured interviews with a combination of regulators, Shariah supervisory board members, Shariah department executives and Shariah experts from the central bank and Islamic banks in Bangladesh.FindingsThis study proposes a CSGF which is comprising two-tier Shariah supervisory boards (SSBs), i.e. institutional SSB and centralized Shariah supervisory board (CSSB) under the central bank to monitor the overall functions of SG. The study recommends the setting up of four departments under the central bank to enhance the functions of CSSB. Besides, the central bank can introduce Shariah rating, external Shariah audit and external Shariah review through Islamic rating agencies and Islamic Chartered Accountant Firms for transparency and quality compliance which are more desired from the public and other stakeholders.Research limitations/implicationsThe study significantly contributed to the national and global regulatory bodies by providing a structural CSGF for the Islamic banks to perform their functions and activities smoothly.Practical implicationsThe study outlines a CSGF for the Islamic banks in Bangladesh as the existing practices are diversified and decentralized. Therefore, this framework would be helpful for the central bank and Islamic banks in Bangladesh to promote unique practices of the SGF.Originality/valueThis is the first research that provides a structure of CSGF for Islamic banks in Bangladesh, while the central bank of Malaysia developed the first SGF. There is no study concerning the demographic figure of CSGF of Islamic banks in the entire literature.

An analysis of customer satisfaction on employee professionalism: a comparison between Islamic and conventional banks in Malaysia

PurposeThis paper aims to make a comparative analysis about the level of customer satisfaction on employee professionalism between Islamic and conventional banks in Malaysia. It also explores the important factors that attract customers to banks and identifies the strategies to improve customer satisfaction on employee professionalism.Design/methodology/approachThis study uses a quantitative approach, where questionnaires are distributed to a total of 312 respondents.FindingsThe results show that customers are more satisfied with the conventional banks’ employees in terms of their reliability, responsiveness, assurance and empathy, except for tangibility, where they are more satisfied with the Islamic banks’ employees. It is also found that customers who have been engaging with the bank for more than one year consider each dimension of employee professionalism as important in ensuring their satisfaction with the bank.Research limitations/implicationsThis study is conducted in Malaysia and the respondents of this study are limited to 312 respondents only.Originality/valueThis study provides some insights on the area of service quality and customer satisfaction from a developing country’s environment (Malaysia) using the modified SERVQUAL model to perceive professionalism. This paper also explores a more specific area by highlighting the significance of service quality towards customer satisfaction from the perspective of gender, religion and respondents’ period of being a customer to the bank.

The practice of imposing default rate in Islamic home financing product in Malaysia: Analysis from regulatory and Shariah perspective

In developing and structuring an Islamic banking product, one of the areas that should be addressed is to mitigate risk that includes default risk. Financial institutions will always be exposed to the risk of default by customers. This is faced by Islamic banks as well when granting financing facilities to customers irrespective of the underlying Shariah contracts that apply to the product structure. In order to mitigate such risk, bank normally will impose late payment charges if the instalment amount is not received by the payment due date. In addition to the normal late payment charges, banks may also impose default rate on customers who have defaulted within certain period. As such, this study analysed the practice of charging default rate in Islamic home financing product involving sale- and lease-based contracts. This qualitative study adopted the explanatory methodology as the main method of data collection from relevant documents, such as Shariah-related regulatory policies, Shariah resolution issued by Bank Negara Malaysia (BNM), decided court cases, and Islamic bank product documentation related to the practice of charging default rate. Next, secondary data from journal articles and other published sources, including Shariah literature relevant to this study, were deployed to analyse the said issue. Evidently, several Islamic banks in Malaysia seem to impose default rate in their product structure. Such practice may not be consistent with the spirit of Shariah and Islamic finance if the purpose is to gain more income while the customers face financial issues. This study prescribes Shariah scholars and regulator to re-evaluate the current regulatory policies and product structure to ensure that they embrace the spirit of Shariah, apart from protecting consumers from heightened financial burden.

Board of Directors, Shariah Committees and Sustainability Commitment of Islamic Banks in Malaysia

Board of Directors, Shariah Committees and Sustainability Commitment of Islamic Banks in Malaysia

‘PINJAMAN PERSAHABATAN’: SATU KAJIAN UNDANG-UNDANG DI MALAYSIA

Financial institutions licensed which were established under the Financial Services Act 2013 and the Moneylenders Act 1951 in Malaysia will provide financial loans at the interest rate charged permitted by-laws and guidelines from the Central Bank of Malaysia to borrowers. However, not all borrowers can afford to pay high and onerous interest rates. Therefore, the law in Malaysia allows for friendly loans, i.e. the lender will provide financial loans assistance to the borrower from of interest or with minimal interest rate. This study will focus on the extent to which the legal issues of the practice of friendly loans in Malaysia and whether the provisions of current laws and policies can protect the interests of both lenders and recipients of friendly loans. This study is qualitative in nature and involves library research. The results of this study will look at aspects of legal issues in order to protect the interests of both lenders and recipients of friendly loans. In fact, Malaysia could also consider creating a special law on friendly loans and regulated by the authorities.

A Conceptual Framework for Bounded Rationality in Bank Officers’ Credit Decision for SME Lending in Malaysia

Based on the Bounded Rational Theory, ideally, bank credit officers would be influenced by both rational (fundamental factors) and irrational (behavioural factors) in their credit assessment and decision making process. Emphasizing on the irrational decision making perspective, behavioural factors distort the credit decision making process in the banking industry. Despite such evidence, the psychology perspectives in bank lending practice has been given little attention in research and neglected in practice and policy perspectives. This conceptual research investigated the role of irrationality in bank lending decision making. The research design involved three stages. The research started with conceptualization of the bounded rational credit decision framework. This was designed based on review of three theories and related empirical evidence. In the second stage, constructs and their measurement items were sourced from prior work. Thereafter, a questionnaire was developed. In the third stage, the validity of the questionnaire was tested using expert validation, pre-test and pilot-test involving 30 credit officers working in business banking division of a Malaysian bank. Findings from the pilot study confirmed the validity of the questionnaire as an instrument that can be used for future empirical test. This bounded rational credit decision framework can guide further empirical analysis on the role of behavioural factors in lending decision making. The framework provides new insights that are valuable in enhancing the SMEs lending theory, practice, and policy. Keywords: behavioural finance, bounded rational theory, business banking, credit decision, small and medium-sized enterprises (SMEs)

Intellectual Capital, Market Value, and Financial Performance: Indonesia and Malaysia’s Banking Companies

This study aims to determine the effect of intellectual capital on market value with financial performance as an intervening variable: evidence from banking companies in Indonesia and Malaysia. The analysis tool uses Partial Least Square to test hypotheses. The results of this study are intellectual capital affects the financial performance of banking companies in Indonesia but does not affect the banking companies in Malaysia. Intellectual capital does not affect the market value of banking companies in Indonesia but affects banks in Malaysia. Financial performance affects market value in Indonesian banking companies but does not affect banking companies in Malaysia. For indirect or mediation effects, the result is that financial performance can mediate the effect of intellectual capital on market value in banking companies in Indonesia but not for banks in Malaysia. Banking companies must pay attention to intellectual capital management because of its impact on financial performance and market value. The market will give a higher valuation to companies that have increased financial performance. Next, companies with improved financial performance will be responded positively to the market so that it will increase market value.

A comparative analysis of employees’ and customers’ attitude towards Islamic banking

PurposeIslamic banking industry with all of its exponential growth and global recognition has been under criticism for the past two decades. However, the problem signifies further when such criticism is made from within the organization and is well supported by outside (the customers). The purpose of this study is to provide a coherent exploration to investigate the factors that polarize its employees and customers across many parts of the world.Design/methodology/approachTo investigate the phenomenon, a total of 30 responses were taken through interviews 15 each from customers and employees. Afterwards, the data was analysed and summarized into two categories. In doing so, the top five Malaysia’s Islamic banks were shortlisted to collect data from employees and customers.FindingsA detailed thematic analysis resulted in six themes (Contradiction between theory and practice, Islamic banking knowledge and awareness, inadequate Shariah training, employees’ background, Shariah compliance, Islamic banking benefits) for employees and five (Islamic banking benefits, applying Shariah in Islamic banking, knowledge of Islamic banking, Islamic banking promotion, Islamic banking employees’ behaviour) for customers, respectively.Research limitations/implicationsThe results have stronger implications for both practice and theory as organizations can assess stakeholders and their perceptions about Islamic banking. Another implication is the comparative examination of employees and customers which can potentially affect decision and policy making in Islamic banks. Islamic banks can also address employment-related issues related to employees’ behaviour vis-à-vis marketing-related problems faced by its customers that will ultimately improve its global market share and strategic positioning.Originality/valueThe study is based on the importance of Islamic banking in Malaysia and explores the factors that potentially create a positive or negative insight into Islamic banking – both in employees and customers.

A Study on the Need for VBI in Malaysian Islamic Financial Industry and its Shari'ah Perspective

The purpose of this paper is to highlight the need for Value-Based Intermediation (VBI) in Malaysia introduced by Bank Negara Malaysia (BNM) in March 2018, under the guidance of Shari'ah Advisory Council (SAC), which is the decisive authority in matters relating to Shari'ah, analyse the aim of VBI against that of SDGs in the light of Maqasid al-Sahri'ah, and to assess VBI from the perspective of Shari'ah. The growth of Islamic banking in Malaysia experienced a boost where the market share of Islamic banking assets grew from 7.1% in 2010 to 28% in 2016, but there has been a decline in Islamic finance's annual growth from 24.2% in 2011 to only 8.2% in 2016. There could be various reasons for this decline, such as maintaining a steady growth requires constant innovation in the products and services offered. However, innovation becomes difficult in case of IFIs, since they have to comply with legal and Shari'ah rules at the same time. Qualitative method of study is used for this paper. It is found in the study that VBI not only conforms with the principles of Shari'ah but also re-focuses IFIs to achieve the objectives of Shari'ah or fulfill Maqasid al-Shari'ah. The study also found that VBI is also in line with the SDGs, which are human-made goals presented to the world by United Nations around 2012. However, while SDGs are prone to changes and criticism, the objectives, or goals of Shari'ah are holistic, permanent, and divine. VBI is a concept applicable only in Malaysia's Islamic Finance Industry until the time this paper is written, and therefore, it focuses only on the Malaysian IFI. There is a need to understand why VBI was needed in Malaysian IFI despite each Islamic bank having their own Shari'ah committee and SAC of BNM and this paper will help develop that understanding.

Assessing the performance of Islamic banks in Malaysia based on balanced scorecard (BSC) measures and Shari'ah guidelines compliance

PurposeIslamic banking sector is gaining popularity globally. However, in recent decades, Malaysia's Islamic banking sector has been reckoned as an influential force in the global economy and became a rapidly growing industry. In fact, the international banking industry has admitted Malaysia as the leading Islamic banking center with the most progressive and attractive planning, strategic directions of development, and numerous incentives for nurturing this sector. Hence, this paper aims to evaluate the performance of Islamic banks in Malaysia based on Balanced Scorecard (BSC) measures and Shari'ah Guidelines Compliance.Design/methodology/approachTo achieve the objectives of this paper, BSC performance evaluation system and Shari'ah Guidelines Compliance were used based on the data collected through an online poll survey across Malaysian Islamic banks from an aggregate of 994 information focused on 71 items, using 14 respondents in which ten were from the regional level and four were from the headquarters of the bank. Furthermore, nine respondents were bank managers and five were bank employees.FindingsThe findings of the paper are as follows: First, there is a useful connection among BSC estimates, attributes of Shari’ah Compliance and Islamic banks' performance. Second, tremendous improvement has been seen in the Malaysian Islamic banks, which used both the BSC measures and Shari'ah Guidelines Compliance.Practical implicationsThe practical implication of the findings is that utilizing the BSC count and Shari’ah consistence characteristics; Islamic banks can better their exhibition and therefore, the banks ought to receive the recorded down rules alongside the BSC measures and Shari'ah ascribes to accomplish a superior presentation, benefit and achievement of Islamic currency advertise.Originality/valueThe novelty/originality of this paper can be seen from the fact that despite the BSC becoming a widely used performance management tool; still, there is a deficiency of standardization between a company and its perception of the term BSC and also mostly, research works on BSC were carried out on the United States- and European-based organizations, but in Malaysia, nothing more was done, especially in the Islamic banking sector, while this model is capable of covering both economic and non-economic estimate of presentation and therefore, considered as a sophisticated presentation computation system for performance evaluation.

Using the Theory of Planned Behavior and Religion to Assess Customers Behavioral Intention to Adopt Islamic Banking Services in Malaysia

Malaysia is a multi-racial country with a highly variegated ethnic mix. The ethnic groups of Malaysia consist mainly of the Malay community, the Chinese community, and the Indian community. This identity contributes to the different perception and acceptance of the Islamic banking system among its citizens. Due to that, the market share of the banking industry in Malaysia is dominated by conventional banking. The latest statistic registered an increase in the total deposit in 2017 and 2018 by 10.3%, amounting to RM640 billion, representing 33.4% of the banking system's total deposits. Notably, 66.6% of the total deposits contributed by the conventional banking system, actively leading the industry, while Islamic banking has taken the backseat, which may not augur well for the future of Islamic banking. The quest to attract customers is a significant challenge for Islamic banking in Malaysia. This study aims to determine Malaysian customers' behavioral intention to adopt Islamic banking services and determine whether religion affects customers' behavioral intention to adopt Islamic banking services in Malaysia. To achieve this, an exAnanned Behavior (TPB) model was tested in this study. The hypothesized path to achieve this in the structural model influencing an individual's intention to adopt Islamic banking and financial services were positive attitude, positive subjective norms, perceived behavioral control and behavioral religion variable on Islamic banking selection among customers. A set of questionnaires was distributed and answered by 149 working respondents. The data were analyzed using IBM SPSS Statistics Version 20. This study showed that attitude and religion demonstrate a significant positive relationship with behavioral intention to adopt Islamic banking services in Malaysia. This reflects that attitude and religion are the most influential factors in selecting Islam selecting customers in Malaysia. The study also showed that attitude is the most significant factor in influencing customers' behavioral intention

The Performance of Islamic Banking in Malaysia

The Performance of Islamic Banking in Malaysia

Customer’s awareness, trust, discomfort and acceptance of anti-money laundering practices in Malaysian Banks

PurposeThis study aims to examine the associations between customers’ awareness of money laundering and terrorism financing, trust in banking secrecy measures and discomforts in fulfilling the bank’s anti-money laundering (AML) procedure and their acceptance of existing practices of banks regarding AML and counter-terrorism financing.Design/methodology/approachThis study adapts a set of survey instruments developed and validated by prior studies to collect the required data. A convenient sample of 160 Malaysian bank customers aged 18 and above were surveyed to collect the data.FindingsThis study finds a significant relationship between the respondents’ awareness of money laundering and terrorism financing, trust in banking secrecy measures and their acceptance of the bank’s AML and counter-terrorism financing practices. However, no significant relationship is documented between the level of discomforts experienced by customers in satisfying the banks’ AML requirements and their acceptance of the banks’ AML practices. These results hold even after controlling for alternative explanations of the customers’ acceptance of banking practices examined in the extant literature: age, gender, location, literacy level and occupation.Research limitations/implicationsThis study extends the literature on customers’ acceptance of banking practices more broadly by providing empirical evidence on the role of customers’ awareness on issues underlying the banking practices and their trust in the bank’s secrecy measures.Practical implicationsThis study also provides some practical contributions by shedding some light on the factors that could help banks increase the acceptance of AML practices among their customers. Thus, the findings of this paper help banks focus their effort on these factors and hence increase acceptance rate more effectively.Originality/valueDrawing on the elements of the theory of reasoned actions and technology acceptance model and the extant research on trust-privacy and comfortability in a banking setting, this study proposes an integrated approach that is theoretically and empirically grounded.

Maqasid-based Consumer Preference Index for Tawarruq Personal Financing (TPF)

Relatively, maqasid al-Shariah is a missing dimension element in the available tawarruq personal financing, resulting in a convergence of this facility and its traditional counterpart. This work examines the consumer preference of tawarruq personal financing using the maqasid-based consumer preference index (MCPi). Drawing upon the MCPi, the present study examines consumer preference on the offered Tawarruq personal financing by 7 Islamic banks in Malaysia based on valid 456 usable questionnaires. The primary findings obtained indicate that all banks somewhat have a moderate MCPi. These include Bank Islam Malaysia Berhad (BIMB), Bank Muamalat Malaysia Berhad (BMMB), Maybank Islamic, CIMB Islamic, RHB Islamic, Kuwait Finance House and Al-Rajhi Bank. This study examines a new approach to measure consumer preference using the MCPi. Our contributions are confined to these particular variables – Educating Customer, Establishing Justice and Promoting Welfare. Our study also limits its perspective on the general context of tawarruq personal financing. Future works may provide different perspectives on these interrogations. This study provides a new index for Islamic banks to manage tawarruq personal financing products according to maqasid al-Shariah effectively. This study introduces a new measure of consumer preference of tawarruq personal financing namely the MCPi in the context of Malaysia.

The Effects of International Financial Reporting Standard Adoption on Conservatism in Malaysian Banks

The purpose of this study is to investigate the effect of IFRS full convergence in 2012 on conservatism of banks in Malaysia. Based on 66 firm-year observations of Malaysian banks listed in the main market of Bursa Malaysia, the results of this study reveal an overall increase in conservatism during the study period and a higher increase of conservatism following IFRS adoption. The results also provide evidence of significant differences in the level of conservatism in pre- and post-adoption of IFRS. The findings of this study highlight the benefit of IFRS full convergence among the banks in Malaysia in enhancing financial reporting quality proxied by conservatism. Thus, this study provide implication to the regulators and banks to continually support IFRS adoption as the standard continually change over the time. Our result also provides new evidence on the effect of IFRS on conservatism for financial sector which have different regulatory framework from other sectors.

AGRIBUSINESS AS THE SOLUTION FOR THE UNDERUTILIZED WAQF LANDS: A VIEWPOINT FROM THE WAQF ADMINISTRATORS

Waqf land bank in Malaysia has huge potential to be developed but most of the lands are underutilized due to the administrative and legal (conventional and Shariah) issues that are plaguing them. The underutilized land size is estimated to be around 87% from the 30,000 hectares waqf lands, as at 2018. This study focuses on Selangor and Perak to explore on the same issue by interviewing the relevant key informants to gather their feedback. In order to unlock the potential of these waqf lands, pragmatic model or approach needs to be researched and implemented - and this study suggests agribusiness. Therefore, this study embarks on the preliminary field work that intends to assess the potential to develop the waqf lands in Selangor and Perak for agribusiness activities.

Job characteristics of a Malaysian bank's anti-money laundering system and its employees' job satisfaction.

Background: Banks and financial institutions are vulnerable to money laundering (ML) as a result of crime proceeds infiltrating banks in the form of significant cash deposits. Improved financial crime compliance processes and systems enable anti-ML (AML) analysts to devote considerable time and effort to case investigation and process quality work, thereby lowering financial risks by reporting suspicious activity in a timely and effective manner. This study uses Job Characteristics Theory (JCT) to evaluate the AML system through the job satisfaction and motivation of its users. The purpose of this study is to determine how satisfied AML personnel are with their jobs and how motivated they are to work with the system. Methods: This cross-sectional study used JCT to investigate the important elements impacting employee satisfaction with the AML system. The five core dimensions of the job characteristics were measured using a job diagnostic survey. The respondents were employees working in the AML department of a Malaysian bank, and the sample group was chosen using a purposive sampling approach. A total of 100 acceptable replies were gathered and analysed using various statistical approaches. A motivating potential score was generated for each employee based on five main job characteristics. Results: Findings revealed that five core job characteristics, namely, skill diversity, task identity, task importance, autonomy and feedback, positively influence the AML system employees' job satisfaction. However, skill variety and autonomy are found to be low, which are reflected in the poor motivating potential score. Conclusion: This study examined the characteristics of the AML system and its users' job satisfaction. Findings revealed that task significance is the most widely recognised characteristic, followed by feedback and task identity. However, there is a lack of skill variety and autonomy, which must be addressed to improve employee satisfaction with the AML system.

The Profitability of Commercial Banks in Malaysia

This study investigate son the factors affecting the profitability of commercial banks in Malaysia during the period of 2011-2017. The samples were taken based on the historical accounting data from annual reports of the banks. It is used to measure the internal determinants whether had direct impact toward the bank profitability measured by Return on Asset (ROA). This paper utilized quantitative methodology in ascertaining the relationship between the factors and profitability of the commercial bank. The results stated that bank size, liquidity and deposit ratio had a significant and positive relation with return on asset (ROA) except for GDP is significant but negative relationship. Although there were relationships among bank size, liquidity and deposit ratio but inflation rate did not have a significant influence on the profitability of the banks. The importance of the study is to improve the financial performance of Malaysian banking for investment and finance and to improve the Malaysia banks' operations.

Technical Efficiency Determinants of Islamic Banks: How Do Countries Differ

Purpose: This paper analyzes the determinants of technical efficiency of Islamic banks in eight of the Islamic countries. These include Brunei Darussalam, Jordan, Indonesia, Pakistan, Malaysia, Turkey, Saudi Arabia, and the UAE. Design/Methodology/Approach: A quarterly panel data on eight Islamic countries’ banks during the period of 2014 to 2019 is used for the analysis. Findings: The overall outcomes of the study indicate that banks in KSA, UAE, and Malaysia are found to be more efficient than their counterparts in other five countries in the sample. Banks from KSA and UAE have the same average technical efficiency scores while banks in Malaysia and Jordan tend to share similar average technical efficiency scores. Findings of the study reveal that variables like bank size, return on equity, and liquid asset ratio have a positive and significant bearing while factors like GDP growth rate, Z-score, and capital adequacy ratio have a negative and significant impact on technical efficiency of Islamic banks. Implications/Originality/Value: The study puts forward some useful policy implications both for managers of banks and policymakers of countries in the sample.