This paper empirically studies the macroeconomic factors determining the non-performing loans (NPLs) of the banking and financial institutions in Malaysia. Using a set of time series data from Q12006 to Q42015, Auto-Regressive Distributed Lag (ARDL) method was employed to discover the significant relationships between the variables in the long run as well as short run elasticity within the model. The study concludes that the level of NPLs in Malaysia is affected by Malaysian macroeconomic variables namely Gross Domestic Product (GDP), Base Lending Rate (BLR), Inflation (INF) and Household Income Distribution (ID). The result implies that GDP is significant and negatively affect NPLs, meanwhile BLR and ID are significant and positively related to NPLs, in line with the expected results. Nonetheless, INF resulted in insignificant relationship with NPLs contrary to our expectation. The result of this research is useful to assist financial institutions and the regulators for policy formulation so as to minimize the negative effects of NPLs to the Malaysian financial system.

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Contribution/Originality: This study is one of very few studies which have investigated the lead-lag analysis among these three-investment avenues by using VECM, VDCs and other related techniques. Furthermore, this study attempts to fill the gap in empirical studies and associated theory which remains unexplored and not broadly discussed in the literature.

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This qualitative research paper considers the recovery issues on Murabahah financing as the theme as to add to the existing Murabahah literature. The purpose of this paper is to investigate the recovery issues on Murabahah financing in Malaysia, specifically on the recovery via court cases. A descriptive and content analysis were performed on six Murabahah cases heard in the Malaysian court extracted from Lexus Nexus database. The results suggest that the issue on ta'widh, Murabahah restructuring and guarantees is of common weight while the issue on ibra is also important lately. Apart from the recovery issues, it is noted that failure to adhere to the guidelines formulated by the regulator persists and heavy reliance on common laws is unavoidable and continue to be the subject matter. Future research should further discuss on the efficiency of the recovery activities and discuss the area of developing Islamic banking laws appropriate to cater for the issues discussed herein.