Stability Of Islamic Banks Research Articles

Pemberdayaan Ekonomi Perempuan Melalui Program Bank BTPN Syariah: Studi Literatur

The aim of this research is to find out whether financial inclusion has an effect on the stability of sharia banking in Indonesia using the Generalized Least Square (GLS) method. To measure the financial stability of Islamic banking, the inclusion variable contains MSMEs and Deposits, while the stability variable used is NPF. The research method used in this research is quantitative descriptive with the help of the Generalized Least Square (GLS) method which corrects problems in the classical assumption test, which is tested based on Eviews 12 with panel time series data. The research results show that the independent variable MSMEs has a significant effect on NPF. The independent variable Deposits has a significant effect on NPF. Reliability UI results using the F test for the MSME and Deposit variables together have an effect on NPF.

Islamic bank stability and efficiency: A cross-country analysis

Purpose ― The study investigates the impact of the efficiency of Islamic banks on banking stability. Method ― A panel data analysis using the Least Square Dummy Variable Corrected (LSDVC) method is employed to examine the impact of efficiency on banking stability in Islamic banks. The study has a sample of 54 Islamic banks across eight countries from 2013 to 2021.Findings ― The findings reveal that the efficiency of Islamic banks has a positive and significant effect on banking stability. In addition, financial turmoil negatively and significantly affects the stability of Islamic banks but does not significantly affect institutional development. Additionally, financial turmoil can influence how effectively Islamic banks manage their businesses in response to banking stability. The outcomes are robust across various robustness methods. Implications ― The results imply that the efficiency of Islamic banks has a pivotal role in banking stability, considering the efficiency level. To ensure the stability of Islamic banks, practitioners and regulators of Islamic banks have to achieve and maintain the efficiency of Islamic banks by implementing the required policies and guidelines.Originality/Value ― Previous studies examining the impact of Islamic banks' efficiency on banking stability remain limited. The paper fills the research gap by examining how Islamic bank efficiency affects banking stability, considering the effects of financial turmoil and institutional development.

The Islamic Financing on Macroeconomic Stability in Indonesia

The objective of this study is to examine the function of Islamic finance in fostering macroeconomic stability in Indonesia. Specifically, it will scrutinize the stability of Islamic banks, its effects on micro, small, and medium enterprises (MSMEs), and its impact on economic growth and inflation. Employing a qualitative research approach, data were gathered by means of document analysis, encompassing books, scholarly publications, and institutional reports. The results demonstrate that Islamic banks, which employ profit-sharing and asset-backed financing structures, have higher levels of stability in comparison to conventional banks, therefore mitigating the likelihood of financial catastrophes. Islamic finance has profoundly facilitated the expansion of MSMEs by offering cost-effective, interest-free lending, therefore augmenting their productivity and economic contributions. Furthermore, Islamic finance promotes consistent economic expansion by prioritizing investments in tangible assets in industry areas such as agriculture and manufacturing. Although it suppresses speculative activity, its effect on inflation is inconclusive, as further growth of micro, small, and medium enterprises (MSMEs) may have upward influence on pricing. In conclusion, the study highlights that Islamic finance contributes to Indonesia's macroeconomic stability by strengthening Islamic banks, promoting MSME development, and fostering balanced economic growth. The data shows a consistent rise in the contribution of MSMEs to Indonesia's GDP from 57.08% in 2017 to 61.90% in 2022, underscoring their increasing significance in the national economy. This upward trend highlights the growing role of MSMEs in economic development.

BOARD STRUCTURE AND ISLAMIC BANK STABILITY: A STANDALONE RISK COMMITTEE MODERATING EFFECT

This study investigates the impact of board attributes on the stability of Islamic banks and whether the presence a standalone risk management committee (SARC) moderates their relation. Applying the feasible generalized least squares (FGLS) regression as well as the two-step system generalized method of moments (GMM) estimator for robustness to a panel sample of 43 Islamic banks across 15 countries over eleven years from 2010 to 2020, we document evidence suggesting that board meetings, board gender diversity and foreign directors do not influence the stability of Islamic banks. Conversely, board members holding doctorate degrees (PhDs) significantly and negatively affect the stability of Islamic banks. In addition, the presence of SARC significantly improves the stability of Islamic banks. The study further finds that SARC partially and positively moderates the effects of board members with PhDs and foreign directors on the stability of Islamic banks.

Does Macroeconomic Moderate The Effect of Risk and Diversification on Financial Stability? Evidence from Islamic Commercial Bank

<em><span>Islamic banking's financial stability can improve efficiency and health and be able to withstand shocks originating from internal and external factors. This study analyzes the impact of risk, diversification, and inflation on the financial stability of Islamic banking. By using monthly time series data from 2018–2022, the analysis method used is multiple linear regression and moderate regression analysis (MRA) using the Eviews version 10 application. The results showed that the credit risk variable (NPF) has a significant negative relationship to financial stability (Z-Score). As well as the liquidity risk variable (FDR), financing diversification has a significant positive effect on the financial stability of Islamic banking (Z-Score). Macroeconomic variables (inflation) can strengthen the effect of financing diversification and weaken the effect of liquidity risk (FDR), but inflation cannot moderate the effect of credit risk (NPF) on the financial stability of Islamic banking (Z-Score). This study introduces a new theoretical approach to the conceptual relationship between variables. The findings can serve as a reference for monetary authorities in considering the impact of inflation in setting financial stability policies.</span></em>

The Determinants of Financial Stability of Islamic Banks in ASEAN

Financial stability is one of the drivers of economic growth, while Islamic banking currently dominates in global economic competition compared to other Islamic finance industry. Therefore, it is necessary to investigate the aspects that can affect the financial stability of Islamic banks. The purpose of this study is to analyze how capital structure, profitability, efficiency, and technology affect the financial stability (Z-Score) of Islamic banks in the ASEAN region. The study employs a panel data regretion. It utilizes documentation techniques such as the financial reports of each bank and other publicly available data. Sample selection is done through purposive sampling, resulting in a sample of 19 Islamic banks in ASEAN. The research concludes that capital structure significantly and positively influences stability, while efficiency has no impact on stability, and the financial soundness of ASEAN's Islamic banks is significantly impacted negatively by technology and profitability. Based on the findings of this research, the Islamic banks are required to pay more attention to the management of funds obtained from profitability as well as fund management for technology needs so as not to affect the financial stability of Islamic banks in ASEAN.

Sustaining and Stabilizing During Covid-19: Effective Management of Bank Financial Behavior through Digital Financial Inclusion

Digital financial inclusion is critical for achieving higher economic growth, sustainable development, and a more financially inclusive nation. Additionally, digital financial inclusion is vital for stabilizing the Islamic banking industry during the COVID-19 epidemic, leveraging its resistance to financial shocks, and fostering financial inclusiveness. Islamic banks are usually considered because of their significant ability to counter financial crises and their prominent contribution to financial landscape. This study investigated the digital financial inclusion and Islamic banking stability nexus using unbalanced panel data from 65 Islamic banks from six countries from 2010 to 2021. This study uses a GMM approach and a Z score. The finding implies that the default risk of the banks in the analyzed area is reduced due to the increased stability of Islamic banking brought about by the broader application of digital financial inclusion. Digital financial inclusion is more strongly correlated with banks' financial soundness. Access to banking services, made possible by digital financial inclusion, also dramatically improves banking stability and makes banks more resilient. Moreover, incorporating digital financial inclusion into Islamic banking promotes inclusive economic development, which may help the industry weather crises like the present COVID-19 epidemic. This study lays out the policy implications that increasing bank stability, bolstering financial literacy, and combining digital financial inclusion with other strategies to keep banks viable.

The impact of the COVID-19 pandemic on the financial performance and stability of Islamic banks

Purpose The purpose of this paper is to investigate the impact of the COVID-19 pandemic on the financial performance and stability of Islamic banks (IBs) in the Middle East, North Africa and Southeast Asia (MENASA) region. Design/methodology/approach The sample consists of 50 IBs across 13 MENASA countries. The data covers 11 quarters, starting in Q1 2019 and ending in Q3 2021, and are collected from banks’ quarterly reports. The authors proxy financial performance by three measures, namely, return on assets (ROA), return on equity (ROE) and cost-to-income (Cost/Income). For financial stability, the authors use two indicators: insolvency risk (log Z-score) and asset risk (ROA/SDROA). The methodology is based on the generalized least squares method estimation. Findings The results showed a significant and negative impact of COVID-19 on two performance measures of IBs (ROA and ROE) suggesting that IBs were significantly affected during the earlier pandemic. As well, the authors found strong evidence of the impact of COVID-19 on the insolvency risk and asset risk of the studied banks. Practical implications The study of COVID-19’s impact on the performance and stability of IBs in MENASA countries permits the banks’ regulators and policymakers to ameliorate the banks’ financial performance and reinforce their supervisory actions. Also, it gives them assistance to guarantee the financial stability of these banks in times of crisis. Originality/value This study provides significant financial information and policy implications for stakeholders involved in the banking sector in MENASA countries. Consequently, IBs must guarantee their profits and stability to ensure their competitiveness versus conventional banks during the period of crisis.

Islamic and Conventional Banks Stability in Indonesia

Research Originality: The stability of banking institutions is crucial for the overall financial health of a country. The originality of this paper lies in its innovative use of quantile regression analysis to provide a nuanced understanding of the factors influencing bank stability, particularly in the Indonesian context.Research Objectives: This research identifies factors influencing bank stability in Islamic and conventional banks in Indonesia.Research Methods: Utilizing quantile regression analysis to measure the impact of various factors at different quantiles, addressing the existing mixed findings in the literature. This study utilizes 15 years of data, encompassing 61 observations for Islamic banks and 779 observations for conventional banks in Indonesia.Empirical Results: The study identifies impaired loans as the primary determinant of bank stability in Indonesia, with a notably greater impact on conventional banks compared to Islamic banks. Notably, the upper quantile of Islamic banks indicates a decline or a lesser impact on bank stability. The paper additionally concludes that the stability of Islamic banks in Indonesia is comparatively lower than conventional banks.Implications: By offering insights into the different levels of factors affecting bank stability, the study contributes to the existing literature, sheds light on unique dynamics, and highlights potential recommendations for enhancing bank stability, especially in the context of non-performing loans.JEL Classification: C21, C23, G21How to Cite:Khan, S., Aziza, N. A., & Nawaz, A. D. (2024). Islamic and Conventional Banks Stability in Indonesia. Etikonomi, 23(1), 167 – 182. https://doi.org/10.15408/etk.v23i1.33879.

Determinants of Islamic bank stability in Asia

Purpose This study aims to analyze the factors that influenced the stability of Islamic banks in Asia. Design/methodology/approach The panel data consisted of 16 Asian countries operating Islamic banks from 2010 to 2019. The data were analyzed through dynamic panel regression using Arellano–Bond generalized method of moments (GMM). Findings This study provides novel insights into the factors influencing the stability of Islamic banks in Asia. The findings suggest that past financial stability, liquidity risk, loan risk, inflation, gross domestic product, government effectiveness, rule of law and control of corruption are all significant contributors to Islamic bank stability. Notably, political stability, voice and accountability and regulatory quality did not show a significant association. Research limitations/implications The current study’s focus was solely on Islamic bank stability in Asian countries, which leaves room for further exploration. Future research could benefit from expanding the scope to encompass all nations with active Islamic banking institutions. In addition, incorporating a broader range of macroeconomic variables, such as exchange rates, interest rates, profit-sharing equivalents and investment rates, could provide deeper insights into the factors influencing Islamic bank stability across diverse contexts. Practical implications This study has significant practical implications for policymakers, bank managers and regulatory authorities seeking to enhance the stability of Islamic banks in Asia. By implementing robust risk management frameworks, adopting prudent regulatory policies, and actively fostering economic growth, policymakers can create an environment conducive to the sustained development and prosperity of Islamic banking institutions. Notably, promoting good governance practices and instituting effective crisis prevention measures can further bolster the resilience of the Islamic banking sector, enabling it to play a more dynamic role in contributing to the overall development and welfare of Asian societies. Social implications The findings of this study carry significant social implications, highlighting the need for governments in Asian countries to prioritize public policies that promote good governance and ethical practices within the banking industry. Such policies, coupled with efforts to attract foreign investments and foster a stable and transparent banking sector, have the potential to generate far-reaching positive effects on society. Through economic growth stimulated by a robust Islamic banking sector, Asian countries can create new employment opportunities, improve living standards and ultimately enhance the overall well-being of their citizens. Originality/value This study contributes to the ongoing discourse on Islamic banking stability by offering novel insights and expanding the empirical knowledge base in this field. The dual application of robust regression methodologies – namely, GMM dynamic panel data models – presents a unique analytical framework for investigating the complex interplay between diverse variables and Islamic bank stability. This methodological choice fosters deeper understanding of the dynamic relationships at play, advancing our understanding of how specific factors influence the sector's resilience and performance. In addition, the study uses rigorous empirical techniques and engages with the extant literature to provide fresh perspectives and nuanced interpretations of the findings, further solidifying its contribution to the field's originality and richness.

Risk governance and financial stability of Islamic banks: A systematic literature review

The objective of this study is to identify studies that have addressed the impact of risk governance on the financial stability of Islamic banks. This study applied the preferred reporting items for systematic reviews and meta-analyses (PRISMA) method to identify and collect all studies that have addressed the impact of risk governance on the financial stability of Islamic banks. We worked only on articles published between 2000 and 2022. We found a wealth of literature on risk governance and financial stability. Our results identified 80 articles out of a total of 301 considered relevant to our analysis. Our results show that risk governance and financial stability are analyzed separately by researchers, and most researchers have analyzed the impact of risk governance on the performance of conventional, and Islamic banks. Battaglia et al. (2014), Jallali and Zoghlami (2022), and Raouf and Ahmed (2022) are among the researchers who have analyzed the impact of risk governance on financial stability. This study is the first to carry out a systematic review of the literature on the impact of risk governance on the financial stability of Islamic banks. It could be useful for future academic studies and researchers in this field.

The Role of Monetary Authorities and Banking Regulators in Supporting Sharia Bank Liquidity

This study aims to analyze the influence of the role of monetary authorities and banking regulators on the liquidity of Islamic banks in Indonesia. This research uses a qualitative approach with panel data analysis method. The sample of this study is 27 Islamic banks operating in Indonesia during the period 2019-2022. The data used are secondary data obtained from Islamic bank financial statements, Islamic banking statistics, and publications of relevant authorities. The results of this study show that the role of monetary authorities and banking regulators has a positive and significant influence on the liquidity of Islamic banks in Indonesia. This shows that the role of monetary authorities and banking regulators is very important in influencing the performance, growth, and stability of Islamic banking in Indonesia. This research provides theoretical and practical contributions for academics, practitioners, and policy makers with an interest in the liquidity management of Islamic banks. This research also provides input and advice for monetary authorities and banking regulators in increasing their role in supporting Islamic bank liquidity in Indonesia.

Impact of Asset Quality on Financial Stability of Islamic Banks in Pakistan: A Moderating Role of Corporate Image

The study encompasses the financial stability management in the Islamic banking industry in Pakistan keeping in view the impact of asset quality and moderating role of corporate governance. Five Islamic banks were selected for the study, and secondary data was analyzed and obtained from the annual financial reports for eleven years from 2010-to 2020. After using descriptive statistics, correlation analysis, variance inflation factor, regression analysis, and fixed and random effect model, results show that CAR and LDR significant impact on z-score whereas Bs, Bind, and CEO duality are positively significantly associated with z-score. Moreover, the mean average value of financial ratios shows that LDR and CAR have a better impact on z-score than the NPL.

Capital requirements – risk taking/stability nexus during the global financial crisis and COVID-19: international evidence of Islamic banks

Purpose This study aims to determine how Basel III capital requirements affect the stability of Islamic banks globally during the global financial crisis and the COVID-19 pandemic. Design/methodology/approach The secondary data for all Islamic banks worldwide from 2004 to 2021 is obtained from the FitchConnect database. The main technique was a two-step generalized method of moment (GMM) system, and the data were tested using pooled ordinary least squares, fixed effects and difference GMM models for robustness checks. Findings Regression results support the moral hazard hypothesis based on evidence that both the total capital ratio and the Tier 1 capital ratio have a statistically significant positive impact on the stability of Islamic banks globally. Furthermore, neither the global financial crisis of 2008–2009 nor COVID-19 (2020–2021) significantly impacted the stability of Islamic banks worldwide. The results are robust across alternative measures of stability, capital buffers, dummy variables and estimation techniques. According to the descriptive statistics, the number of Islamic banks that disclose their regulatory capital ratios to the public has increased over the study period, and the mean of total capital and Tier 1 ratios are considerably greater than what is required by Basel II and Basel III. Research limitations/implications Bankers, regulators and policymakers should benefit from the evidence on capital and risk management in Islamic banking according to Basel Committee on Banking Supervision (BCBS) and Islamic financial services board (IFSB) international standards in various jurisdictions. Originality/value This research builds on earlier studies that were both beneficial and instructive by exploring the relationship between BCBS and IFSB capital guidelines and the trustworthiness of Islamic banks in greater depth. This study uses numerous capital ratios, buffers and stability measures to provide an international context for research on Islamic banking. In addition, the database is up-to-date to include information about the COVID-19 pandemic aftereffects in the year 2021. This study also introduces the Basel membership of Islamic banks to provide context for countries still at the Basel II stage or are yet to begin implementing the Basel III international standard.

Bank performance in achieving Islamic bank stability conditions: Evidence from Islamic Banks in Indonesia

This study aims to analyze the effect of Islamic bank performance on Islamic bank stability in Indonesia. Research using monthly time series data from OJK Sharia Banking Statistics 2015-2022. The analytical tool uses ECM and ECT tests to test the long-term impact and short-term response of operational efficiency, liquidity and bank size on the stability of Islamic banks. The research results found that the performance of Islamic banks in terms of operational efficiency has a negative effect on the stability of Islamic banks in both the short and long term. Furthermore, liquidity has no effect on the stability of Islamic banks in the long term, but has a positive effect in the short term. While bank size has a positive effect on the stability of Islamic banks in the long term, it has no effect in the short term

Bank Performance in Achieving Islamic Bank Stability Conditions: Evidence From Islamic Banks in Indonesia

This study aims to analyze the effect of Islamic bank performance on Islamic bank stability in Indonesia. Methodology using monthly time series data from OJK Islamic Banking Statistics 2015-2022, this study utilizes ECM and ECT tests to examine the long-run impact and short-run response of operational efficiency, liquidity, and bank size on Islamic bank stability. Findings this study found that the performance of Islamic banks in terms of operational efficiency has a negative and significant effect on the stability of Islamic banks both in the short and long term. Furthermore, liquidity has a positive and insignificant effect on the stability of Islamic banks in the long term, but has a positive and significant effect in the short term. Meanwhile, bank size has a positive and significant effect on the stability of Islamic banks in the long term, but for the short term it has a negative and insignificant effect.

Pengaruh Kebijakan Restrukturisasi Pembiayaan dan Tingkat Efisiensi Terhadap Stabilitas Sistem Keuangan Bank Syariah Di Indonesia dengan Ukuran Perusahaan Sebagai Variabel Kontrol (Study Kasus Pada Saat Pandemi Covid 19 Tahun 2019-2021)

The financial system in a country is a very important sector, so it is very important to keep the financial system stable. The financial system's stability can measure bank resilience in dealing with the impact of the financial crisis. The phenomenon of the crisis that is being experienced by Indonesia is a crisis due to the pandemic Covid 19 which has an effect on economic health around the world. For this reason, in this study, they want to know the effect of restructuring policies and the level of bank efficiency on the financial stability of Islamic banks. Quantitative research with secondary data from the results of the financial statements of each bank used in this study. PanelData Regression Method Using 6 Islamic Banks used as a research sample with a time period from Q1 in 2019 to Q4 in 2021. The results of the study show that the restructuring policy and company size have a significant positive effect on the financial stability of Islamic banks, while the variables of the level of efficiency projected have no effect on the financial stability of Islamic banks.

Pengaruh Diterbitkannya Perppu Nomor 1 Tahun 2020 Terhadap Stabilitas Sistem Keuangan Bank Syariah Di Indonesia

The Covid-19 pandemic has shaken the national economy. This causes the wheels of the economy to not run, so that the business world loses demand and at the same time loses the ability to create supply. The spread of the corona virus has disrupted the performance and capacity of debtors from the business community in carrying out their credit obligations so that it has the potential to disrupt banking performance in managing credit which in turn can disrupt the stability of Islamic banks. One of the government's efforts to minimize the impact of the Covid-19 pandemic outbreak on the country's economy including the financial sector is to ratify Perppu No. 1 of 2020. This study analyzes how the effect of the issuance of Perppu No. 1 of 2020 has on the stability of the financial system of Islamic banks in Indonesia. The method used in this research is descriptive analysis method. The results of the analysis found that the issuance of Perppu No. 1 of 2020 has so far not had an impact on the stability of the financial system of Islamic banks in Indonesia. This is due to the fact that during the Covid-19 pandemic, no sharia bank has experienced a serious enough shock so that the various facilities offered through the Perppu have not been utilized by sharia banking

Capital, Efficiency, Management Risk on Islamic Bank Stability During Covid-19 PandemiC

The performance of the banking sector in one period is one of the indicators in encouraging financial stability in a country. Banking stability is reflected by healthy conditions and a well-run intermediation function. The purpose of this study is to see the impact of the Covid-19 pandemic shock in the short and long term which affects capital, efficiency, and management risk on the stability of Islamic banking in Indonesia. Analysis of this study using quantitative methods based on the Vector Error Correction Model (VECM). Empirically, the results of this study show that the CAR, BOPO, and FDR variables are significantly positively correlated to the stability of Islamic banks in the long term. Meanwhile, the NOM and NPF variables in length are negatively correlated with the stability of Islamic banks during the Covid-19 pandemic. In the short term the significant influential variables are NOM and FDR while the other variables have no effect. This shows that the Covid-19 pandemic shows an impact on bank stability in the future. This research proves that during the Covid-19 Pandemic, Islamic banks have succeeded in taking several policies in the form of financing restructuring which have proven effective in maintaining islamic banking stability.

The asymmetric impact of macroeconomic variables on Islamic bank home financing in Indonesia

Purpose – The study investigates the performance of non-performing financing (NPF) in the housing sector concerning the asymmetric influence of macroeconomic conditions. Methodology – The method of the study adopts nonlinear autoregressive distributed lag (NARDL), while the data of the study ranges from 2014m6 to 2022m2.Finding – The findings reveal an asymmetric relationship between macroeconomic variables and NPF is present both in the short and long run. In addition, the COVID-19 has worsened the NPF of Islamic banks' home financing in some sectors in the short run, while only such financing in the flat and apartment market has suffered during the pandemic in the long run.Implication – The implication of the study suggests that the Islamic banking industry and financial authority need robust risk management and financial policies, respectively, to achieve and maintain the stability of Islamic banks in home financing activities. Originality – The study is original in measuring the impact of macroeconomic influences on Islamic banks' home financing from a nonlinear viewpoint.