Management Of Financial Institutions Research Articles

The Contribution of Internal Audit to Credit Management in Financial Institutions in Mali

The ultimate aim of this article is to present the role played by the internal auditor in the performance of decentralized financial systems (SFD). First of all, our reflections are directed towards a more in-depth literature review in order to better define the concepts and apprehend the nature of the binding relationship between internal audit and internal control, then we presented the research methodology followed in this case the qualitative methodology with exploratory aim, We then presented the results of an interview guide with seven auditors and a member of the management committee working in various Moroccan banks, who were of two types: the first considers that information and communication are the conditions for the success of an ICS, while the second emphasizes the importance of respecting the components of internal control. As with any study, our research was limited by the size of our sample, which we felt was limited due to the health crisis, which meant that managers were unavailable to carry out our interviews. The academic interest of this article lies in reinforcing the literature on the subject, while the managerial interest lies in detecting apparent gaps in the ICS to help managers in their decision- making. Our aim is to examine the contribution of internal audit to the effectiveness and efficiency of the internal control system. Our study is based on Moroccan banks. The interest of this report is to explore the ICS of the selected banks.

Analisis Rasio Permodalan Bmt Produsen Gema Mandiri Syariah Kota Bima

This study is entitled "Capital Analysis Ratio of BMT Produsen Gema Mandiri Syariah Kota Bima" The purpose of this study is to determine the level of sharia health and compliance in the BMT Produsen Gema Mandiri Syariah Kota Bima on aspects of capital based on cooperative classification standards according to the cooperative ministerial decree and small business and intermediate number 07 / Per / Dep.6 / IV / 2016. Analyze cooperative financial statements based on the Decree of the Minister of Cooperatives and Small and Medium Enterprises Number 07 / Per / Dep.6 / IV / 2016, Evaluate the financial performance of cooperatives. This study uses 1 type of assessment of health aspects and components in the form of: Capital. The assessment will find out how healthy BMT Produsen Gema Mandiri Syariah Kota Bima is in terms of finance, and how obedient in predetermined sharia principles. From these calculations the BMT Produsen Gema Mandiri Syariah was classified as "Fairly Healthy" Cooperative. This is because it has an unfavorable value because BMT Produsen Gema Mandiri Syariah Kota Bima does not yet have a sharia supervisory board, does not yet have equity participation and financing originating from Islamic financial institutions and also cooperative management does not yet have an educational certificate for management of Islamic financial institutions issued by competent parties.

Analyzing the linkage between Islamic financial literacy and Islamic banking services adoption: evidence from Turkey

PurposeThe purpose of this study is twofold. First, this research explores the level of Islamic financial literacy of customers in the context of Islamic banking. Second, this study examines the determinants of customer adoption of Islamic banking in Turkey.Design/methodology/approachThis study gathered sample data from 409 participants determined using the purposive sampling method. In the study, first, the reflective measurement model is used to examine the reliability, validity and multicollinearity problems of the variables. Then, AMOS structural equation model (SEM) is used to reveal the relationship between Islamic financial literacy and Islamic banking services. Additionally, this study performed both descriptive and inferential analysis to understand customer literacy about Islamic banking and their adoption behavior of Islamic banking.FindingsThe results obtained from descriptive assessment indicate that Turkish customers of Islamic banking possess sufficient literacy about Islamic banking. Moreover, the results from SEM indicate that the adoption of Islamic banking by customers is significantly predicted by the role of Sharia Board management, Islamic banking and purpose of financial institution, religious factor and legitimacy of Islamic financial system.Research limitations/implicationsThis study focuses only on the level of knowledge and perceptions of customers who have accounts in Islamic banks or financial institutions in Turkey. It does not focus on the level of knowledge and perception of Muslims who do not have accounts in Islamic banks and financial institutions.Originality/valuePrevious studies on Islamic banking are mostly studies that investigate customers’ perceptions of the Islamic banking system and why individuals prefer Islamic banks. In particular, studies examining the relationship between individuals’ Islamic financial literacy level and Islamic banking preferences are limited. This study is considered to be an original study as it investigates the relationship between the Islamic financial literacy level of individuals and their adoption of Islamic banking services in Turkey.

Wakalah Financing Guarantee Law and Risk Management in Sharia Financial Institutions

This paper discusses the theory of guarantees on financing associated with wakalah contracts and also risk management in Islamic Financial Institutions (LKS). This research is a qualitative research using a normative juridical approach. Analysis and presentation of data will be using analytical descriptive method. The data collection method used in this paper is a library study or documentation study. The author is of the view that the shahibul maal financial institution in the form of shahibul maal gains the trust of everyone to carry out the mandate to use funds in a fair and correct manner and must be followed by the correct bonds and conditions in accordance with Islamic law, so as to be able to benefit all those concerned. Islamic banks as one of the sharia financing institutions must have guidelines for Islamic provisions, as well as for carrying out economic activities. Islamic banks must always pay attention to obtain profits, so that it is good if banks and customers are in accordance with Islamic law and regulations.

Penerapan Kaidah Fiqh Manajemen Laba Pada Lembaga Keuangan Syariah Dalam Perspektif Islam

The purpose of this study is to determine the application of fiqh related to earnings management in Islamic financial institutions. The method used in this research is a qualitative method. The presence of fiqh rules is needed to solve problems in a broad scope, even in Islamic financial institutions, especially in earnings management. Either in its application or regarding rules that are restrictive in lawful or not prohibited implementation. Usually in Islamic financial institutions, mudharabah and musyarakah are contracts that are commonly used for transactions in Islamic banks. The application of fiqh principles in earnings management is proven to be significantly applied, through its application which must comply with Islamic ethical provisions and be based on the Islamic spirit. In the practice of earnings management, all parties must behave according to sharia provisions or according to sharia principles.

The Application of Maintenance Functions in The Human Resources Management of Islamic Financial Institutions

Sharia Savings and Loan Cooperatives are unique in that they must balance their business principles with high and volatile work demands. The care function of human resource management is an essential aspect of ensuring employee well-being and job satisfaction within organizations, including sharia savings and loan cooperatives. This study specifically focuses on examining the application of maintenance functions at KSP BMT Surya Abadi Jenangan Ponorogo, an esteemed Islamic financial institution that has experienced rapid development in Indonesia and has contributed to economic improvement through its diverse financing products. This research aims to provide valuable insights into the organization's practices and contribute to the broader understanding of human resources management in Islamic institutions and ultimately improve the quality of their workforce and service performance. Through a comprehensive analysis, this study has illustrated the practices carried out by the organization in maintaining employee welfare and retention. KSP BMT SURYA Abadi Jenangan Ponorogo demonstrates efforts in prioritizing employee welfare and retention, with notable aspects including occupational health and safety, communication, and human resource welfare programs, although improvements are needed, particularly in the area of occupational health and safety.

Generation Z’s Financial Behaviour: The Role of Islamic Financial Literacy

Purpose — This research aims to examine the effect of family communication patterns on Islamic financial literacy (IFL) and risk tolerance of Generation Z (Gen Z) in Indonesia. It also examines the link between IFL, risk tolerance and financial behaviour. Finally, it highlights the moderating impact of IFL on the link between risk tolerance and financial behaviour. Design/Methodology/Approach — This study used Muslim members of Gen Z in West Sumatra Indonesia who were born between 1995 and 2001 as the population. This study collected 668 responses in two months. After some preliminary tests, such as missing value and normality test, it employed 571 usable responses as the sample. Purposive sampling was conducted and variance-based structural equation model-partial least square (SEM-PLS) was employed as the method for data analysis. Findings — The results show that family communication patterns, both conformity and conversation orientation, positively and significantly influence IFL and risk tolerance. IFL has a positive and significant impact on risk tolerance and financial behaviour. Surprisingly, IFL also moderates the link between risk tolerance and financial behaviour positively and significantly. Finally, risk tolerance significantly affects financial behaviour. Originality/Value — This research makes three theoretical contributions. First, it provides a better understanding and a more complex model of the relationship between IFL with its antecedents such as family communication patterns and also with its consequences, including risk tolerance and financial behaviour. Second, it reveals that IFL affects Gen Z’s financial behaviour significantly—an aspect which is neglected in previous research. Third, it has expanded the scope of prior studies by addressing IFL as a moderator of the link between risk tolerance and Gen Z’s financial behaviour. Research Limitations/Implications — Even though this study has carried out Harman’s single-factor analysis to anticipate a common method bias, it faces the common method bias problem due to the cross-sectional nature of the study. Secondly, the study focuses on Gen Z, which means that most of the respondents are students and their financial behaviour is still affected by the decisions of their parents. Practical Implications — This study has some contributions for decision makers such as Otoritas Jasa Kewangan (Financial Services Authority) and management of Islamic banks and financial institutions. First, to increase Gen Z’s IFL, the decision makers have to educate the parents using the two-way communication orientation method. Second, the financial behaviour of Gen Z is influenced by financial literacy and risk tolerance; hence, decision makers such as the government and society have to educate Gen Z on IFL and inform them about financial risks which influence their risk tolerance when conducting financial activities. Article Classification — Research paper

Corporate social responsibility and financial performance nexus: Empirical evidence from Ghana

AbstractThis paper investigates the relationship between corporate social responsibility and the financial performance of Ghana's publicly listed financial institutions. Twelve listed financial institutions on the Ghana Stock Exchange (GSE) provided secondary data during a 10‐year period (2010–2019). The data were examined using descriptive statistics, correlation matrix, rotated factors, factor score efficiency, and regression results. Corporate social responsibility (CSR) has a favourable effect on profitability and stock returns, according to the data. This demonstrate that while CSR enhances businesses' capacity for financial success, it should not be viewed as an optional activity but rather be included in long‐term business strategies. The study recommends management of financial institutions to ensure CSR activities are formally inbuilt into their policy statements and backed with an effective budget. The study further recommends more publicity be given to CSR programs undertaken by financial institutions to assist them get the needed potential benefits in enhancing their ROE and ROA. This study serves as a guide for policymakers and reference for future research on the effect of CSR on company performance in Sub‐Saharan Africa.

IMPACT OF FINANCIAL RISK ON THE FINANCIAL PERFORMANCE OF MICROFINANCE INSTITUTIONS: A LITERATURE REVIEW

Microfinance is an economic means designed to encourage financial inclusion to reach poor people that traditional formal financial institutions like banks are unable to reach. In recent decades, the microfinance sector has experienced remarkable expansion. The aim of this study is to review the existing literature in order to ascertain how financial risk impacts MFIs' capacity to maintain their financial viability. Numerous research on efficiency, the twin goal of achieving sustainability and social performance, and financial sustainability have been carried out in the past and few have been conducted on analyzing the financial risk’s effect on the financial performance of MFIs. Liquidity risk and credit risk are potentially serious risks for the financial system’s stability and the long-term viability of financial institution management.

The Enterprise at the Service of Society in the 21st century

The Enterprise at the Service of Society in the 21st century

Corporate governance and risk management in Islamic and convectional financial institutions: explaining the role of institutional quality

PurposeThis study aimed at exploring the differential effects of different corporate governance (CG) indicators on risk management practices in Islamic financial institutions (IFIs) and conventional financial institutions (CFIs) of Pakistan. It also investigated the moderating role of institutional quality (IQ) in shaping the effects of CG practices on financial institutions of Pakistan.Design/methodology/approachA sample of 57 financial institutions including commercial banks, insurance companies and Modarba companies over the period 2006–2017 is used to carry out the empirical analysis. The authors applied the robust two-step system-generalized method of moments estimator, which is also called the dynamic panel data estimator. They also built the PCA-based composite index of CG and IQ by using different indicators to investigate the moderating role of IQ. They used three proxies for risk taking, five for CG and one for Shari’ah governance. To test the validity of the instruments, they applied the Arellano and Bond’s (1991) AR (1) and AR (2) tests and the J-statistic of Hansen (1982).FindingsThe results provided strong evidence that several individual characteristics of CG and the composite index are significantly related to the operational risk, the liquidity risk and the Z-score (a proxy for solvency risk). The results also revealed that IQ significantly and substantially contributes in reducing the level of risks. Finally, the estimation results indicated that the effects of CG on risk management are significantly different at IFIs and CFIs. This differential impact is mainly attributed to the fundamental differences in business models, operational strategies and contractual obligations of both types of institutions.Practical implicationsThe findings of this study are important for enhancing our understanding of how CG relates to risk taking in Islamic and conventional financial services industries and how good quality institutions are important for formulating the governance effects on the risk-taking behavior of financial institutions. The findings suggest that a suitable size of board should be chosen to manage the risk effectively. As the findings show that the risk-taking behavior of IFIs differs from that of CFIs, the regulators and international standard setting bodies should tailor the regulatory frameworks accordingly.Originality/valueThis paper is different from the existing studies in four aspects. First, to the best of the authors’ knowledge, this is the first empirical investigation in Pakistan, which does the comparison of IFIs and CFIs while examining the impacts of CG on risk management. Second, the paper constructs the composite index of CG by considering several different indicators of governance and examines the combined effect of governance indicators on risk management process. Third, this paper adds to the growing literature on the role of IQ by investigating whether it acts as a moderator between CG structures and risk management and if yes, then whether this moderating role is different for IFIs and CFIs. Finally, the paper builds upon the existing research work on the CG effects for different types of financial institutions by proposing a single regression based analytical framework for comparing the effects across two different types of institutions, harvesting the benefits of higher degrees of freedom and avoiding/minimizing the measurement error.

The effect of Covid-19 on digital banking explored under business model approach

PurposeThis study aims to understand the impacts of Covid-19 on the progression of digitalization of banks in an emerging market. For this purpose, business model canvas (BMC) is used as a theoretical framework to explore these effects on each business elements of Turkish Banks’ business strategies.Design/methodology/approachData are collected through structured interviews with the top managers of seven diversified banks. Interview questions are designed based on BMC.FindingsThe results show that the onset of the Covid-19 is a shock that has made digitalization a strategic issue that necessitates an urgent change in many business elements of banks such as customer relationships, communication channels, resource allocation, partnerships and financing. Further, it has stimulated redefining value proposition and collaboration/interaction among all financial institutions through digital platforms.Practical implicationsBMC can be used to explain decision-making and business processes of banks for exploring the effect of recent and/or unexpected developments in the business environment of an emerging economy. The results provide insights and recommendations to managers of financial institutions into the impacts of Covid-19 on banks’ operational and strategic processes. That allows financial institutions, including Fintechs, to use this information for taking precautions and proactive actions against shocks.Originality/valueThis study is an initial attempt to explore the impacts of the Covid-19 on banks in an emerging economy by using BMC. With that, this study contributes to the literature by explaining the effect of progression of digitalization in banking from a strategic business model perspective using a qualitative research method.

Responsible finance and financial literacy

This article examines the financial education needed to achieve responsible finance. Responsibility here is considered in the broadest sense, i.e. towards company stakeholders, but also towards society and future generations. Given that finance is not only a social science and that it also includes a moral dimension, we first argue for a minimum financial education for all citizens, a condition for inclusive finance. We then outline some major changes that are intended to structure responsible financial education. The conclusions drawn concern academics and researchers working in financeas well as managers of financial institutions.

Modernising operational risk management in financial institutions via data-driven causal factors analysis: A pre-registered study

In an effort to contribute a quantitative, objective and real-time tool to proactively and precisely manage the factors underlying and exacerbating operational risks, this pre-registered study executes the empirical methodology approved in the associated pre-registered report (Cornwell et al., 2023). The application of the Bayesian network-based approach to an Australian insurance company shows that integrating a financial institution's loss and operational data in this way can effectively model the probability of an operational loss event within its interconnected operational risk environment. Further insights and efficiencies are gained by modelling multiple operational loss events together, rather than in isolation. A novel two-module framework derived specifically for causal factors analysis from the resulting operational risk model helps to highlight the relative importance of causal factors, their collective effects and critical thresholds requiring proactivity. These insights derived from the framework are expected to be strategically valuable in helping an organisation design intentional and targeted controls for and monitoring of operational risks. Given existing knowledge of the improvements quantitative risk management tools make to risk management effectiveness and subsequently firm value, the enhanced risk management and the operational efficiencies this tool seeks to afford should ultimately contribute to driving financial performance and firm value.

Loan Portfolio Management and Performance of Financial Institutions in Rwanda

Loan Portfolio Management and Performance of Financial Institutions in Rwanda

Credit risk management in small-scale farming by formal financial institutions during the COVID-19 era: Nigerian perspective

PurposeProviding loans, particularly to small-scale farmers, is one of the roles of formal financial institutions. Lending to small farmers is risky. An institution's health is closely related to the institution's ability to manage credit and portfolio risk. Expanding smallholder farmers' access to finance while maintaining a sustainable financial system is essential; however, pandemics present additional challenges. Accordingly, as reported in the literature, the pandemic's high loan default rates and decreases in return on assets (ROAs) call for further credit risk management research. There have been limited studies on credit risk management during coronavirus disease 2019 (COVID-19), so this article aims to provide useful information on its influences.Design/methodology/approachResearchers used data from formal financial institutions in 2018 (before COVID-19) and in 2021 (during COVID-19) to accomplish the study's broad objective. Descriptive and inferential statistics were the main analytical tools. The credit risk management indicators were categorized into collateral management, loan management, loan recovery management, governance and Information and Communication Technology (ICT). Weights were assigned to each category based on the importance to credit risk management. A binary logit model was employed in assessing the factors influencing credit risk management as proxied to loan repayment, while Ordinary Least Square (OLS) was used to examine factors that influence ROAs.FindingsOne of the most noteworthy findings is that credit risk management is affected by different factors and magnitudes before and during the COVID-19 era. Loan recovery and ICT management indicators were most influential during the pandemic. In addition, the study noted that low agricultural productivity during the pandemic contributed to an additional challenge in loan default rates because of various COVID-19-containing measures. Additionally, there was a lack of governance and ICT management capacity to drive credit and portfolio risk management during the epidemic.Originality/valueThe paper presents new empirical findings on credit risk management during the COVID-19 era. The study used a methodology which has not been used previously in credit risk management in Nigerian financial institutions. Therefore, this research could become the cornerstone of further academic research in other developing countries using this methodology.

Risk management in financial institutions and acceptable best practices

Risk management in financial institutions and acceptable best practices

Housing justice as expansion of people’s capabilities for housing

Housing inequality is a growing concern in our society. In recent decades, this inequality has been exacerbated by the phenomenon of housing being financialized and commodified as a means for wealth accumulation. Management of financial institutions and housing markets has become the centre of attention in policy discussion. The questions of how to promote the moral values tied to housing, such as human rights, dignity and freedom, and how to better enable people to access suitable housing have been marginalized. As a way forward, the states’ re-intervention and redistribution policies, and the human rights-based approach to housing policies are discussed, but this thesis advocates for a more ambitious paradigm shift. By extending Amartya Sen’s capability approach to housing, the thesis argues for resetting the primary goal of housing policies as expansion of people’s capabilities for housing—expanding opportunity, ability and security to lead their valued ways of residing—beyond the distribution of monetary and material resources for housing, such as housing benefits and dwelling units. This thesis presents the theoretical foundations of this argument and proposes basic principles to guide housing policies, which can serve as a normative basis of housing debates on necessary policy actions. An essential tool to guide housing policies towards this newly proposed goal is to evaluate policy outcomes and housing affairs of people—well-being, deprivation and inequality in housing—with capability considerations. The thesis suggests how this evaluation can be done and can help policies address the inequalities in what people can do to pursue their suitable housing options and how well they are actually residing.

Forecasting for regulatory credit loss derived from the COVID-19 pandemic: A machine learning approach

The economic onslaught of the COVID-19 pandemic has compromised the risk management of financial institutions. The consequences related to such an unprecedented situation are difficult to foresee with certainty using traditional methods. The regulatory credit loss attached to defaulted mortgages, so-called expected loss best estimate (ELBE), is forecasted using a machine learning technique. The projection of two ELBEs for 2022 and their comparison are presented. One accounts for the outbreak's impact, and the other presumes the nonexistence of the pandemic. Then, it is concluded that the referred crisis surely adversely affects said high-risk portfolios. The proposed method has excellent performance and may serve to estimate future expected and unexpected losses amidst any event of extraordinary magnitude.

Impact of Service Quality Dimensions on Customer Satisfaction in Nepalese Financial Institutions based on SERVPERF Model

The banking sector's expansion leading to client happiness is critical for a country's economic development because it contribute to large amount of capital resource for the country. Thus, this research aims to quantify the impact of service quality dimensions on customer satisfaction in Nepalese financial institutions based on SERVPERF (Cronin &Taylor, 1992) model. In this paper, the explained variable is customer satisfaction and the predictor variables are tangibility, reliability, responsiveness, assurance and empathy. Convenience sampling technique was used to select 350 respondents from different financial institution within Pokhara city. The study incorporated structured questionnaire for collecting the information on service quality dimensions and customer satisfaction. The confirmatory factor analysis and structural equation modeling techniques were used to examine the five elements of service quality in regard to customer satisfaction. The result of CFA with fit indices of GFI=0.943, AGFI=0.922, χ2 /df =1.434, RMSEA=0.035, CFI=0.881 and TLI=0.854 advocate that the measurement model has a excellent fit. Following CFA, path analysis was performed that resulted with fit indices GFI=0.938, AGFI=0.918, χ2/df =1.341, RMSEA=0.031,CFI=0.885, TLI=0.862 suggest that the structural model has an excellent fit. Furthermore, path analysis results show that the service quality components of assurance, responsiveness, and reliability are positively and significantly associated with customer satisfaction. This study provides policymakers and senior management in Nepalese financial institutions with practical insights for better understanding all aspects of service quality in order to satisfy their clients and develop their relationships for the organization's long-term sustainability