Liquidity Risk Management And Financial Performance In Malaysia: Empirical Evidence From Islamic Banks

Abstract - Liquidity risk arises from maturity mismatches where liabilities have a shorter tenor than assets. A sudden rise in the borrowers‟ demands above the expected level can lead to shortages of cash or liquid marketable assets (Oldfield and Santamero, 1997). This paper aims to analyse the liquidity risks and disclosure as well as to draw the relationship between liquidity risks and financial performance measures using return on assets (ROA) and return of equity (ROE) of the Islamic banks. Based on selected Islamic banks in Malaysia over the period from 2006 to 2008, the study also attempts to determine the impact of the global financial crisis on the Islamic banks‟ liquidity risks and financial performance. Findings of the study contribute towards enriching the literature on the risk management of the Islamic banks by providing deeper understanding on issues relating to liquidity risk management by the Islamic banks

Liquidity Risk Management And Financial Performance In Malaysia: Empirical Evidence From Islamic Banks

Abstract - Liquidity risk arises from maturity mismatches where liabilities have a shorter tenor than assets. A sudden rise in the borrowers‟ demands above the expected level can lead to shortages of cash or liquid marketable assets (Oldfield and Santamero, 1997). This paper aims to analyse the liquidity risks and disclosure as well as to draw the relationship between liquidity risks and financial performance measures using return on assets (ROA) and return of equity (ROE) of the Islamic banks. Based on selected Islamic banks in Malaysia over the period from 2006 to 2008, the study also attempts to determine the impact of the global financial crisis on the Islamic banks‟ liquidity risks and financial performance. Findings of the study contribute towards enriching the literature on the risk management of the Islamic banks by providing deeper understanding on issues relating to liquidity risk management by the Islamic banks

Enhancing transparency and risk reporting in Islamic banks

EThOS - Electronic Theses Online ServiceGBUnited Kingdo

CUSTOMERS PERCEPTIONS ON THE OBJECTIVES, CHARACTERISTICS AND SELECTION CRITERIA OF ISLAMIC BANK IN THAILAND

Due to relatively new establishment of islamic bank in Thailand and paucity of empirical research undertaken in the area, this study intends to capture the perceptions of Thai customers towards the objectives and characteristics of the islamic bank. In addition, this study aims to determine the important bank selection criteria as perceived by the customers and the differences in the perceptions of moslem and non-moslem customers were identified. The study surveys a sample of 462 respondents. The empirical findings show that the Thai customers know that the essential characteristic of the islamic bank is interest prohibition. They tend to support the idea that the islamic bank should strive to achieve its social objectives more than the commercial objectives. In addition, the results showed that there are differences between the Thai moslem and non-moslem customers preferences toward various bank selection riteria. The moslems highly considered the interest-free saving facilities, while the non-moslems tended to concern more about its reputation and image, and knowledgeable and competent personnel

Customers’ Perceptions on the Objectives, Characteristics and Selection Criteria of Islamic Bank in Thailand

Due to relatively new establishment of islamic bank in Thailand and paucity of empirical research undertaken in the area, this study intends to capture the perceptions of Thai customers towards the objectives and characteristics of the islamic bank. In addition, this study aims to determine the important bank selection criteria as perceived by the customers and the differences in the perceptions of moslem and non-moslem customers were identified. The study surveys a sample of 462 respondents. The empirical findings show that the Thai customers know that the essential characteristic of the islamic bank is interest prohibition. They tend to support the idea that the islamic bank should strive to achieve its social objectives more than the commercial objectives. In addition, the results showed that there are differences between the Thai moslem and non-moslem customers’ preferences toward various bank selection criteria. The moslems highly considered the interest-free saving facilities, while the non-moslems tended to concern more about its reputation and image, and knowledgeable and competent personnel

Some issues on murabahah practices in Iran and Malaysian Islamic banks

Purpose – The purpose of this paper is to analyze the nature of Murabahah contract in the fully grounded Islamic banking system i.e., Iran and Malaysia. Design/methodology/approach – The approach taken is descriptive. Findings – Although the main principle of Islamic financial institutions is prohibition of usury, it is surprised to see that Islamic financial institutions are still practicing usury in their transaction as evidenced in Iran. In the case of Malaysia however, BBA home financing is used by Islamic financial institutions and the profit rate is still dependent on the market interest rate due to arbitrage activities. Research limitation/implications – There is no transparent framework for Murabahah contract in Islamic banks. Indeed there is a need for the banking standard regulators to set a clear and disciplined framework for this type of banking contract. Originality/value – The study hopes to improve the overall competency and reliability of the Islamic banking system in the world. The finding of this study will be a basis for further research in Murabaha with respect to the regulatory environment and Shari’ah compliance in particular in Iran

Corporate governance of Islamic financial institutions in Malaysia

Given the phenomenal increase in Islamic banking activities globally, it is important that there exists good governance practices of Islamic financial institutions (IFIs). This is primarily to ensure its sustainability in the long run. More importantly, in order for Islamic banks to play an optimum role in the development of Islamic countries, it is imperative to develop regulatory structures which can help to control fraud, exploitation, and un-Islamic behaviour in banking practices. Additionally, the development of strong governance practices will win public confidence, thereby promoting trust amongst equity holders, investors and other parties dealing with these IFIs. However, promulgating and developing standards and guidelines on corporate governance (CG) may not be adequate. Thus, this paper examines the extent IFIs are adhering to such guidelines. There are two stages to this study. First a disclosure index was developed using the guidelines issued by the Central Bank of Malaysia (BNM), the standard on CG promulgated by the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) and the framework introduced by the Islamic Financial Services Board (IFSB). The index developed in the first stage was then used to assess the annual reports of all the 16 IFIs operating in Malaysia. It was found that on a scale of 0 to 100, the CG disclosure index ranges from a low of 42.28 to a high of 68.29, with the average score of 51.42. This shows that IFIs are not particularly motivated to disclose specific-governance related information. On the basis of the stewardship theory, however, these elements reflect the accountability of IFIs towards their stakeholders. Keywords: Corporate Governance Disclosure Quality, Islamic Financial Institutions (IFIs), Malaysi

The extent of audit report lag and governance mechanisms: Evidence from Islamic banking institutions in Malaysia

The purpose of this study is to examine the extent of audit report lag (ARL) and its association with governance mechanisms in the Islamic banking institutions in Malaysia. The extent of ARL lag is defined by the number of days from a company’s financial year-end to the signature date on its audit report. The sample of the study comprises 112 observations of Islamic banking institutions’ financial reports for the period 2008-2014. A balanced panel data analysis is performed to analyse the association between the extent of ARL and governance mechanisms. The findings show that the extent of ARL for the sample selected ranges from a minimum period of 7 days to a maximum period of 161 days which approximately two months on average. A fixed effects analysis indicates that audit committee expertise and audit committee meeting have significant association with the extent of ARL. On the other hand, board independence, audit committee size and Shari’ah board expertise have insignificant association with the extent of ARL. In addition, one control variable (Islamic bank size) is found to be significantly associated with longer ARL. The findings provide useful feedback for Malaysian policymakers on the past and current practices of financial reports and of governance mechanisms. The findings of the study would help the policymakers in monitoring the Islamic banking institutions’ compliance with financial reports submission requirements. The policymakers perhaps could relook into governance mechanisms that could reduce the extent of ARL in the Islamic banking institutions and implement regulations to strengthen them

Some issues on Murabahah practices in Iran and Malaysian Islamic banks.

The purpose of this paper was to analyze the nature of Murabahah contract in the fully grounded Islamic banking system that is, Iran and Malaysia. The approach taken was descriptive. Although, the main principle of Islamic financial institutions is prohibition of usury, it is surprising to see that Islamic financial institutions are still practicing usury in their transaction as evidenced in Iran. In the case of Malaysia however, BBA home financing is used by Islamic financial institutions and the profit rate is still dependent on the market interest rate due to arbitrage activities. There is no transparent framework for Murabahah contracts in Islamic banks. Indeed there is a need for the banking standard regulators to set a clear and disciplined framework for this type of banking contract. There are currently, Murabahah security (Sukuk) for finance, Murabahah security (Sukuk) for liquidity, companies Murabahah security (Sukuk) and mortgage Murabahah security (Sukuk) products in the Islamic niche of the financial market. A combination of Murabahah Security for Finance and Mortgage Murabahah Security has been the underlying Murabahah instrument. The study hopes to improve the overall competency and reliability of the Islamic banking system in the world. The finding of this study will be a basis for further research in Murabaha with respect to the regulatory environment and Shari’ah compliance

The role of zakat and waqf institutions in enhancing small and medium enterprises towards the socio-economic development of Muslim countries: leveraging on Malaysia’s potentials

Zakat and Waqf institutions have played a significant role in the socio-economic development of Muslims throughout Islamic civilization. This role had declined during the colonial period but is now being revived by several contemporary Muslim countries. This research was conducted to study the current practice and propose means to harness the potential of these two institutions and direct them to enhance the socio-economic development of the Ummah via assisting in developing SMEs