In these ten years, the government on Malaysia was aimed on creating a more conducive environment for competition among the banks and give banks to try to capture the market share. The third phase that commenced from was the period of further financial liberation. At this time, the government gives the opportunities to foreign Islamic banks to operate in our country by issuing a license to them.
Malaysia is the first country that implements dual banking that Islamic banking system and conventional banking system operate side by side.
The Islamic banking nowadays is gaining rapidly and going popularity. Many local and foreign banks in Malaysia are offered and open special Islamic Banking counter. In this research, I will focus on the performance, problems and prospect of Islamic banking in Malaysia. There are lots of issues about Islamic banking in Malaysia, such as public acceptance, factors of selection toward the services and products, risk management and others.
This will be discussed in the next chapter which is literature review. Even the Islamic banking has been introduced in our country over 20 years, but there still have to meet some problem. Based on the above, the research problems are listed as below:. Islamic banking has a significant growth in Malaysia. Many local banks as well as foreign banks are now providing Islamic banking and finance services to the public.
The factors that determine the prospect and growth need to be studied. As a country that consisted of a dual banking system, Malaysia plays an important role as an example to other countries on how to maintain this kind of banking system. This may give the opportunities to Islamic banking to expand and continue to growth.
The public acceptance is playing an important role to determine the succession of Islamic banking in Malaysia. Most of the people are dealing with the conventional banking because the interest rate provides a constant return for the customers. Islamic banking advocate interest free makes people think that there is no return by invest their money in Islamic banking services and products. Thus the public acceptances need to be raised as this will only bring a good prospect and future for Islamic banking industry.
Currently Islamic bank strategically offering high quality products and services to satisfy their customers due to the strong competition, a customer expectations for high quality services and rapidly changes of technology. Some scholars claim that the conservatism concept is not relevant for Islamic accounting reporting because it leads to understating assets that could be subject to Zakah Adnan et.
Others argue, however, that what is meant in Islamic accounting by conservatism concept is the selection of the accounting techniques that has the most favorable impact on society not the owner. I posit that Islamic banks apply an anti-conservatism practices in financial reporting to be consistent with Shariah rules. Using Basu and Ball and Shivakumar models, I find that Islamic banks recognize earnings decrease on timely bases while recognize earnings increase with delay.
This would suggest that Islamic banks take the same accounting conservatism approach as conventional banks and Shariah does not play significant roles in term of financial reporting. In addition, I find that Islamic banks report more conservatively than conventional banks due to additional obligation of Zakah payment and higher litigation risk exposed to the Islamic banks.
In third essay, I examine whether the board structure of Islamic bank, in particular Shariah supervisory board SSB , influence risk-taking behaviors. Under Shariah rules, Islamic banks are expected to engage in less risk-taking investments. The result is consistent with Pathan that larger number of directors in the board is less effective in monitoring bank activities due to coordination and free-riding problems.
Consistent with Shivdasani and Yermack , Christy et al , and Falato et al. Scholars with multiple seats are too busy to mind the business and unable to provide meaningful managerial monitoring. Further analysis provides some evidence that most of the findings on the association between SSB structure and bank risk are derived from countries in the Gulf Corporation Council GCC where Shariah governance is ruled internally at bank level, and such associations are more pronounced after the global financial crisis.
This study sheds light on current practices of Islamic governance and emphasizes the need for well-functioning Shariah board that works with board of directors and management to better realize the goals of Islamic banks in practice. Note Ph.
Note Includes bibliographical references. Note by Amal AlAbbad. Genre theses. This restrained the emergence of Islamic banks on the global markets, since they are unable to show their financial position. For this reason, it is important to investigate tools used for measuring performance in conventional banking, with an attempt to modify according to the unique qualities of Islamic banks. It is of utmost importance for Islamic banks, like conventional banks, to measure their performance in order to function efficiently. In this paper, we will use the financial data for a sample of 49 banks for the period across 11 countries 1 , obtained through Bankscope database.
Macroeconomic data will be used to account for specific economic growth of each country to ease comparability purposes; this data was taken from combined use of Datastream and IMF database. The data will be analyzed using a simple performance ratio evaluation. This technique provides a simple and direct way in evaluating top performers within the sample. Afterwards, regression analysis will employ a straightforward equation.
The model considers internal and external variables in order to determine which factors are most likely to determine returns. The relevant data will then be run in an econometric package called EViews using the OLS method; which is ideal for panel data of this sort. The regression analysis will be the focal point of the research.
The rest of the study is organized as follows. Chapter 2 Islamic banking framework summarizes a brief history of Islamic banks and its structure within the countries being studied. Chapter 3 Literature Review outlines explanations and assumptions applied for the research hypothesis. It also indicates results achieved from past studies on both Islamic and traditional Banking. Chapter 3 Data and Methodology introduces the sample and variables used in the methodology and the model considered throughout.
Chapter 5 presents and discusses the empirical results and its implications. Chapter 6 deals with the limitations and future perspectives of the study and summarizes the concluding remarks of the study. Every economy seeks to transfer funds from savers to investors.
Such function can be performed through financial intermediation of market which banks have a major part of. Banks gains interest in exchange to matching different preferences of savers and investors. This facilitates efficient transfer of funds in the economy, however, interest, which is a major part in banking, is prohibited in Islam. Therefore, Islamic countries have to find alternative ways to perform its banking needs. An Islamic bank, like a conventional bank, utilizes the use of funds from savers to entrepreneurs.
It provides banking activities currently known excluding borrowing and lending, on basis of interest. Islamic banks operate in over sixty countries, mostly in the Middle East and Asia.
Free Essay: INTRODUCTION The basic concept of Islamic banking which is also known as 'interest-free banking' is based on basic ethical standards with just. Category: Islamic Banking Essays; Title: Islamic Banking and Finance.
Most of these countries operate a dual system with Islamic banking alongside conventional. Islamic countries within the Gulf made a dramatic decision to enter the financial markets during mids. Due to the ballooning amount of petrodollars, these countries had their first formal dealing with banks. However, it became apparent that norms of conventional banks do not conform to Sharia. The combination of wealth and piety made the Gulf the perfect place to revive Islamic banking.
Islamic banking activity is highly concentrated in the Middle East.
It has been able to attract large banks due to its location at the centre of the Gulf and its advanced infrastructures. It hosts the Auditing organization for Islamic institutions and among one of the first countries to offer courses in Islamic financial studies. It is also considered to be one of the best off-shore models of Islamic banking due to its policies. It allowed a revolutionary way of applying Sharia in auditing, regulating and developing Islamic financial instruments.
The first interest-free institution, Nasser Social Bank, was established in Egypt in It provided loans for starting business and interest-free loans to less fortunate. This brought about a spread in attention for further developments in Islamic banking in the private sector which was founded in in the UAE. Kuwait Finance House, on the other hand started operations in and so did Bahrain Islamic bank.
Each Islamic bank has a unique board structure requirement consist of a lawyer, an accountant and an Islamic scholar. The structure was implemented in order to consider every aspect in making decisions. The main common objective of these countries is so that it could be an instrument towards social and economic development. Iran was Islamized in , with a three-year transition period. The order was passed by the government which gave banks one year to pursue.