• Title/Summary/Keyword: Islamic Bank

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Performance Analysis of Islamic Banks in Indonesia: The Maqashid Shariah Approach

  • MURSYID, Mursyid;KUSUMA, Hadri;TOHIRIN, Achmad;SRIYANA, Jaka
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.3
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    • pp.307-318
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    • 2021
  • The objective of this study is to analyze the performance of Islamic banks with the Maqashid Shariah approach. The analysis technique used is the Simple Additive Weighting Method (SAW) to solve multi-attribute decision problems. The sampling technique used was purposive sampling while the data came from the annual report of each bank. The results showed that the BTPN Shariah (BTPNS) and Bank Muamalat Indonesia (BMI) are ranked first and second respectively on the Maqashid Shariah Index (MSI) with values of 0.265429 and 0.237110 respectively. Panin Dubai Shariah Bank (PDSB) ranked third with an MSI value of 0.180733, followed by BCA Shariah which ranked fourth with an MSI value of 0.151299. BRI Shariah ranked fifth with an MSI value of 0.128606, followed by BNI Shariah which ranked sixth with an MSI value of 0.124661. Bank Mega Shariah ranked last with an MSI value of 0.087068. Furthermore, there is a relationship (correlation) between ROE, ROA, and OEOI and MSI since each data has a value of 0.000, 0.000, 0.050, and 0.001 respectively, which is smaller than the significance value of 0.05. On the other hand, NPF, TPF, and Asset Growth Rates do not correlate with the MSI since each data has a value of 0.051, 0.252, and 0.215 respectively which is greater than the significance value of 0.05.

The Determinants of The Bank Regulation and Supervision on The Efficiency of Islamic Banks in Different Country's Income Level

  • MOHD NOOR, Nor Halida Haziaton;BAKRI, Mohammed Hariri;WAN YUSOF, Wan Yusrol Rizal;MOHD NOOR, Nor Raihana Asmar;ABDULLAH, Hasni;MOHAMED, Zulkifli
    • The Journal of Asian Finance, Economics and Business
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    • v.7 no.12
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    • pp.721-730
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    • 2020
  • This study investigates the impact of the country's governance on the revenue efficiency of 108 Islamic banks from 26 countries offering Islamic banking and finance products services. The technical efficiencies of individual Islamic banks have been analyzed using the Data Envelopment Analysis method. The data will be pooled across the selected countries and utilize the intermediation approach. The Ordinary Least Square estimation method is employed to examine the impact of country supervision and regulation on the technical efficiency of Islamic banks. As robustness check, the study examines the impact of the level of bank regulations and supervision on the efficiency of Islamic banks operating in different income-level countries. The results found that the stricter the supervisory power, the less strict capital requirement, the tighter the restrictions on non-banking activities, and the stricter the private monitoring enhance statistically significantly the level of efficiency of Islamic banks. In upgrading the regulations and supervision of the Islamic banks, the existing regulatory framework based on the Basel Committee on Banking Supervision (BCBS) must be complemented with the prescriptions on Islamic banking or Shariah compliance diligently, so that the Islamic banks could be regulated accurately and further improve the technical efficiency of their operations.

Productivity of Islamic Banks in Indonesia: Social Funds versus Financial Funds

  • USMAN, Nurodin;ANDRIYANI, Lilik;PAMBUKO, Zulfikar Bagus
    • The Journal of Asian Finance, Economics and Business
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    • v.6 no.3
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    • pp.115-122
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    • 2019
  • Under the Act No. 21 of 2008, Islamic banks in Indonesia as an intermediary institution are obligated to manage the resources simultaneously, the financial funds as well as the social funds, e.g. zakah, infaq, and sadaqah. This study aims to investigate the productivity change of social funds and financial funds of Islamic Banks in Indonesia. Non-parametric tests of Malmquist Productivity Index (MPI) is applied to annual data from period 2012 to 2017, encompassing post-reform of banking authority from Bank Indonesia to The Financial Services Authority (OJK) at 2012. The samples are nine Islamic banks in Indonesia which were able to provide the data during observation period. The results indicate that social funds are more productive than financial funds and productivity change tends to trade off. The productivity of social funds is progressed by 8.2% while the financial funds is regressed by 5.4%. Overall, the productivity change of Islamic banks is influenced by technological aspect rather than the efficiency aspect. Besides, BRI Syariah is the best performer in managing financial funds while BCA Syariah as the best performer in social funds. It implies that the policymakers may strengthen the supervisory and coaching to increase the Islamic banks' productivity in both activities.

Lifestyle Segmentation: The Comparison of Islamic and Conventional Banking Customers in Indonesia

  • Sutarso, Yudi;Rustiana, Elly;Hanum, Rizky Amalia;Gunawan, Wibiksono K
    • Journal of Distribution Science
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    • v.10 no.8
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    • pp.25-34
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    • 2012
  • Understanding customer' lifestyles important for banks because it will guide in determining marketing policies, such as services, pricing, service delivery and promotion decisions. From the customer' lifestyle, banks will know what kind of customers' attitudes, interests and opinions, so they also will understand what the costumer' needs and what services needed by them. For Islamic banks, customers understanding are important because, nowadays, the competition of the banks is not only with other Islamic banks but also with the well-established conventional banks offering Islamic products or services The aims of this research paper are to describe what factors underline the customer's lifestyle of both Islamic and conventional bank, to segment the bank customers based on their lifestyles and investigate the profile of each segments, to compare the characteristics of the segments, and to identify marketing policies based on the characteristics. The population of the study is banking customers in Indonesia, in which the researchers have used judgment sampling as sample selection. There were 186 customers of Islamic banks and 244 customers of conventional bank as respondents in this study. Statistical methods employed were exploratory factor analysis and cluster analysis. The finding of the study shows that there are twelve factor underlining the customers' lifestyle, namely: factor of fashion conscious, internet usage, sports spectator, financial and technology optimism, price sensitivity, independent, compulsive housekeeper, new brand tryer community activities, opinion leader, credit usage, and homebody. In addition, for Islamic banking, there are two market segments, namely fashionable-independent and innovative-social segment. Based on the lifestyle characteristics, the first segment has higher level in factor of fashion conscious, homebody, independent, optimism and price conscious, which is therefore called fashionable-independent segment. On the other hand, the second cluster has higher level in factor of new brand tryer, community minded, sport spectator, credit user, internet usage, opinion leader, and compulsive housekeeper, which is therefore called the innovative-social segment. Furthermore, for conventional banking, there are also two segments, namely persuasive-optimistic and sensitive-independent segment. The first segment has higher level on some factors, namely: opinion leader, optimism, internet usage rate, credit usage level, sport spectator, and new brand tryer. On the other hand, the second cluster is characterized by higher level in factor of price conscious, confidence, community minded, homebody, fashion conscious, and compulsive housekeeper. Managerial implications for the management of Islamic banks could be identified in this study as follows. Firstly, the twelve lifestyle factors of this study could be an alternative view in observe Islamic banking customers. The domination of both the fashionable conscious and the internet usage factor show that the aspects are quite instrumental in perceiving the customer' lifestyles, in which reflects the importance of these two aspects to customers. Secondly, in serving their customers, Islamic banks need to understand the customer lifestyle, in which the lifestyle segments found in this study provide a guide of how their needs were reflected. Finally, by understanding the segments and the characteristics each segment of the conventional banks, Islamic banks could adjust their marketing strategies differently from the conventional banks.

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The Impact of Shariah Supervisory Board and Shariah Audit Committee on Corporate Social Responsibility Adoption at Islamic Banks in Bangladesh

  • ISLAM, K.M. Anwarul;SADEKIN, Mohammad Shamsus;RAHMAN, Md. Tahidur;CHOWDHURY, Md. Ariful Haque
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.3
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    • pp.479-485
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    • 2021
  • Although corporate social responsibility (CSR) is an extensively studied topic, its determinants in the field of Islamic banking are scarce. In Bangladesh, CSR plays a vital role in gaining customer loyalty and confidence. Therefore, this research aims to identify and analyze the influence of the Shariah Supervisory Board (SSB) and the Shariah Audit Committee (SAC) on CSR adoption in Islamic banks in Bangladesh. The study population is managers and second managers of 160 Islamic bank branches of different commercial banks in Dhaka, Bangladesh. The sampling technique used is convenience sampling where the first available primary data source was used for the research without additional requirements. The study developed a survey questionnaire from examining previous related studies in Islamic banking and CSR context. The final sample size in this research was n = 309, indicating the survey response rate was about 97%. The study used SPSS 23.0 software to interpret the statistical findings, and the findings revealed that support from the SSB and the presence of a strong and effective SAC has a strong correlation with CSR adoption and significantly influence CSR adoption in Islamic banks in Bangladesh. Finally, the study proposes several significant and crucial policy guidelines for Islamic bank branches to adopt CSR activities.

The Determinant of Shariah Financing in the Agricultural Sector: Evidence from Indonesia

  • ALAM, Azhar;RUSGIANTO, Sulistya;HASMARINI, Maulidyah Indira;FARHAN, Alifian Muhammad
    • The Journal of Asian Finance, Economics and Business
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    • v.9 no.4
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    • pp.287-298
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    • 2022
  • Indonesia is an agrarian country with the significant development of Shariah banking. This study aimed to estimate the effect of Third Party Funds (TPF), Non-Performing Financing (NPF), Exchange Rates (ER), and Bank Indonesia Shariah Certificates (SBIS) on the Sharia Agriculture Sector Financing in Indonesia during 2014-2020. This study used the Ordinary Least Square (OLS) technique to analyze the data. The coefficient of determination test showed that 99.19% of Sharia financing in the agricultural sector was influenced by TPF, NPF, Exchange Rate, and SBIS variables. The estimation results showed that the variables of TPF and ER significantly affected Sharia Financing for Agricultural Sector (PP). Meanwhile, the NPF and SBIS variables had no significant effect on PP. This research showed the resilience and accuracy of Islamic banking in selecting financing and can support the development of other Islamic financial instruments such as SBIS. Simultaneous test results demonstrated the existence of the estimating model. Because of the character of the Indonesian nation as an agricultural country, this study advised Sharia banking to prioritize the usage of third-party funds from the public for the agricultural industry. Sharia banking also needed to produce Islamic finance products that fit the agriculture business sector's needs.

The Effect of Corporate Governance Disclosure on Banking Performance: Empirical Evidence from Iran, Saudi Arabia and Malaysia

  • KHANIFAH, Khanifah;HARDININGSIH, Pancawati;DARMARYANTIKO, Asri;IRYANTIK, Iryantika;UDIN, Udin
    • The Journal of Asian Finance, Economics and Business
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    • v.7 no.3
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    • pp.41-51
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    • 2020
  • A series of corporate failures and financial crises have raised attention to organizational governance issues, especially for financial institutions. In the banking system, corporate governance further plays a unique role because of the uniqueness of the banking organizations. Therefore, this study aims to examine the effect of corporate governance disclosure on bank performance by building a corporate governance disclosure index (CGDI) for 10 Islamic banks operating in Iran, Saudi Arabia and Malaysia. The data used in this study are secondary data taken from annual reports and sourced from the official websites of each banks include Iran Exchange, Stock Market Quotes and Financial News, and Bursa Malaysia. This study uses content analysis of the annual bank report within five years (2014-2018). The results show that Islamic banks comply with 72.4% of the attributes discussed in the CGDI. The most frequently reported and disclosed elements are board structure and audit committee. The regression results provide evidence that Islamic banks with a higher level of corporate governance disclosure reported high operating performance measured by ROA. In contrast to the expectation, the financial performance of ROE and Tobins'q are not significantly related to the disclosure of sharia bank governance.

Determinants of Indonesian Islamic Rural Banks' Profitability: Collusive or Non-Collusive Behavior?

  • WIDARJONO, Agus;MIFRAHI, Mustika Noor;PERDANA, Andika Ridha Ayu
    • The Journal of Asian Finance, Economics and Business
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    • v.7 no.11
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    • pp.657-668
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    • 2020
  • This paper investigates the effect of market structure, including some bank-specific variables and macroeconomic conditions, on the profitability of Indonesian Islamic rural banks. We apply the structure conduct performance (SCP) and the relative market power (RMP) hypothesis. Panel data comprising 142 Islamic rural banks from 2013Q1 to 2018Q4 are employed. This study breaks them apart, associated with the level of economic development consisting of Java as developed regions and outside Java as less developed regions. This study employs static and dynamic panel regression. The GMM method, however, is appropriate because of the dynamic nature of profitability. Our results confirm the SCP hypothesis and fail to support the RMP hypothesis. The higher market concentration allows Islamic rural banks to generate a significantly higher profit by conducting a collusive strategy. More interestingly, the collusive behavior may result in more profit for Islamic rural banks located in the developed regions than those in less developed regions. Evidence also highlights the importance of operating efficiency and impaired financing on profitability. High operating efficiency and low impaired financing can improve profit. Our results suggest that capitalizing market share by improving efficiency and optimizing financing contracts between PLS and non-PLS contracts also improve profit.

E-SERVQUAL and Its Impact on the Performance of Islamic Banks in Malaysia from the Customer's Perspective

  • Baber, Hasnan
    • The Journal of Asian Finance, Economics and Business
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    • v.6 no.1
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    • pp.169-175
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    • 2019
  • Service quality has been a point of discussion from the decades as it is important for customer satisfaction, loyalty and retention. Various models have been proposed to measure the quality in the service sector. Models are modified in accordance with context and geography to assess the quality of service better. This study aims to investigate the impact of the modified e-SERVQUAL model on the customer perception about the existing relation and potential scope of doing business with a bank which in-turn will decide the performance of the bank. Statistical data was analyzed through various tests like reliability analysis, correlation and regression analysis using SPSS 25.0. The primary data of e-SQ and performance was gathered from 721 internet banking users using 32 item questionnaire, representing 72% response rates, of four selected Islamic banks of Malaysia. E-SERQUAL was modified by adding Shariah Compliance information about banks and products for Islamic banking customers. The finding specified that efficient & reliable services, fulfillment, security/trust, and Shariah compliance information have a significant association with the performance of Islamic banks. The research is original and its implications will be helpful for Islamic banks across the world to enhance the online experience of customers, which will help them to retain the customers in the rapid changing virtual environment.

Enhancing Customers' Satisfaction Using Loyalty Rewards Programs: Evidence from Jordanian Banks

  • ALNSOUR, Iyad A.;ALNSOUR, Ibrahim R.;ALOTOUM, Firas J.
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.11
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    • pp.297-305
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    • 2021
  • The study aims to investigate loyalty rewards programs on customers' satisfaction in Jordanian banks, and to investigate the statistical differences in loyalty rewards programs and customers' satisfaction according to demographics such as age, sex, education level, duration of engagement with bank, and the type of bank. The study is based on the data obtained from the sample. The questionnaire is the tool for collecting data from the respondents. The study materials include website resources, regular books, journals, and articles. The study population consists customers in the banking sector. The figures indicate that number of actual customers reaches 2.06 million. The sample size requirement is 386 items. Customers are split between traditional and Islamic banks, with 231 and 155 customers respectively. The stratified random sampling technique and the structural equations modeling methodology were used. The results show moderated impact of the loyalty rewards programs on customers' satisfaction. The results show statistical differences in the loyalty rewards programs and customers' satisfaction according to the engagement period with the bank only. The findings suggest better managing the loyalty programs and developing one credit card for all banks in Jordan.