Determinants of credit risk of Islamic banking in a dual banking system: a case of selected Muslim countries

The level of credit risk of Islamic banking has generated a great deal of concern to the banking regulatory authorities of many Muslim countries in the last few years. This study, therefore, examined the determinants of the credit risk of Islamic banking within the dual banking system of selected...

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Main Author:	Adewuyi, Abdurraheem abdulazeez
Format:	Thesis
Language:	eng eng
Published:	2016
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/7197/1/s95843_01.pdf https://etd.uum.edu.my/7197/2/s95843_02.pdf
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id	my-uum-etd.7197
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Mohamed Naim, Asmadi
topic	HG Finance
spellingShingle	HG Finance Adewuyi, Abdurraheem abdulazeez Determinants of credit risk of Islamic banking in a dual banking system: a case of selected Muslim countries
description	The level of credit risk of Islamic banking has generated a great deal of concern to the banking regulatory authorities of many Muslim countries in the last few years. This study, therefore, examined the determinants of the credit risk of Islamic banking within the dual banking system of selected Muslim countries for the period 2007-2015. Autoregressive distributed lag (ARDL) and Dynamic OLS were employed to investigate the existence of a long-run relationship between the credit risk of Islamic banking and selected bank-specific and macroeconomic variables. Hirschman-Herfindahl-Index (HHI) was also employed to detem1inc the level of financing concentration by the banks. Evidence from ARDL indicates the existence of a long-run relationship between the credit risk of Islamic banking and financing-deposit gap, real income, money supply, interest rates, credit expansion, and exchange rate in Malaysia, Indonesia and Bahrain. Similarly, evidence from HHI reveals the incidence of financing concentration by Islamic banks in these countries. Furthermore, evidence from Dynamic OLS indicates the existence of a long-run relationship between credit risk and financing concentration in Islamic banking in Malaysia and Bahrain. The inherent risk in financing concentration patircularly in the household and consumer sectors indicates the presence of moral hazard in Islamic banking financing. The implication of the findings of the study suggests that the managements of Islamic banks and the relevant regulatory authorities need to further strengthen the existing credit risk management and monitoring strategies to prevent the incidence of the banking crisis and Islamic banking failure. The understanding of the existence of moral hazard in financing concentration will also guide relevant stakeholders in Islamic banking to ensure that banks are not only Sharia-compliant but also ensure optimum financing portfolio mix that can guarantee the long-run interest of their stakeholders and the overall financial system stability.
format	Thesis
qualification_name	Ph.D.
qualification_level	Doctorate
author	Adewuyi, Abdurraheem abdulazeez
author_facet	Adewuyi, Abdurraheem abdulazeez
author_sort	Adewuyi, Abdurraheem abdulazeez
title	Determinants of credit risk of Islamic banking in a dual banking system: a case of selected Muslim countries
title_short	Determinants of credit risk of Islamic banking in a dual banking system: a case of selected Muslim countries
title_full	Determinants of credit risk of Islamic banking in a dual banking system: a case of selected Muslim countries
title_fullStr	Determinants of credit risk of Islamic banking in a dual banking system: a case of selected Muslim countries
title_full_unstemmed	Determinants of credit risk of Islamic banking in a dual banking system: a case of selected Muslim countries
title_sort	determinants of credit risk of islamic banking in a dual banking system: a case of selected muslim countries
granting_institution	Universiti Utara Malaysia
granting_department	Othman Yeop Abdullah Graduate School of Business
publishDate	2016
url	https://etd.uum.edu.my/7197/1/s95843_01.pdf https://etd.uum.edu.my/7197/2/s95843_02.pdf
_version_	1747828172040175616
spelling	my-uum-etd.71972021-04-05T01:39:54Z Determinants of credit risk of Islamic banking in a dual banking system: a case of selected Muslim countries 2016 Adewuyi, Abdurraheem abdulazeez Mohamed Naim, Asmadi Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HG Finance The level of credit risk of Islamic banking has generated a great deal of concern to the banking regulatory authorities of many Muslim countries in the last few years. This study, therefore, examined the determinants of the credit risk of Islamic banking within the dual banking system of selected Muslim countries for the period 2007-2015. Autoregressive distributed lag (ARDL) and Dynamic OLS were employed to investigate the existence of a long-run relationship between the credit risk of Islamic banking and selected bank-specific and macroeconomic variables. Hirschman-Herfindahl-Index (HHI) was also employed to detem1inc the level of financing concentration by the banks. Evidence from ARDL indicates the existence of a long-run relationship between the credit risk of Islamic banking and financing-deposit gap, real income, money supply, interest rates, credit expansion, and exchange rate in Malaysia, Indonesia and Bahrain. Similarly, evidence from HHI reveals the incidence of financing concentration by Islamic banks in these countries. Furthermore, evidence from Dynamic OLS indicates the existence of a long-run relationship between credit risk and financing concentration in Islamic banking in Malaysia and Bahrain. The inherent risk in financing concentration patircularly in the household and consumer sectors indicates the presence of moral hazard in Islamic banking financing. The implication of the findings of the study suggests that the managements of Islamic banks and the relevant regulatory authorities need to further strengthen the existing credit risk management and monitoring strategies to prevent the incidence of the banking crisis and Islamic banking failure. The understanding of the existence of moral hazard in financing concentration will also guide relevant stakeholders in Islamic banking to ensure that banks are not only Sharia-compliant but also ensure optimum financing portfolio mix that can guarantee the long-run interest of their stakeholders and the overall financial system stability. 2016 Thesis https://etd.uum.edu.my/7197/ https://etd.uum.edu.my/7197/1/s95843_01.pdf text eng public https://etd.uum.edu.my/7197/2/s95843_02.pdf text eng public Ph.D. doctoral Universiti Utara Malaysia Acharya, V.V., Hassan, I. & Saunders, A. (2006). Should banks be diversified? Evidence from individual bank loan portfolios. 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Determinants of credit risk of Islamic banking in a dual banking system: a case of selected Muslim countries

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