An analysis of the growth and rise of smaller Islamic banks in last decade

Abstract

Purpose -The purpose of this paper is to analyse the factors responsible for the rise and growth of smaller Islamic banks in the last decade. Design/methodology/approach -Z-score analysis is used to test the stability of both smaller and larger Islamic banks. The pooled ordinary least square (OLS) regression technique is also employed to examine the factors. Findings -The results of this paper show higher z-scores for smaller Islamic banks indicating that the latter have tended to be more stable than larger Islamic banks over the last decade. Z-scores tend to increase with bank size for large Islamic banks, but decrease with size for the small Islamic banks. The OLS regression results confirm that larger banks have greater income diversity than do the smaller banks. Originality/value -Islamic banking represents a radical departure from conventional banking, and from the viewpoint of corporate governance; it embodies a number of interesting features since equity participation, risk and profit-and-loss sharing arrangements form the basis of Islamic financing. Using econometric techniques, this paper provides valuable insights as to the stability of Islamic banks and the factors responsible for the growth of smaller such institutions that has been witnessed in the last decade.

Islamic Banks’ Financial Stability and Its Determinants: a Comparison Study With Conventional Banks in Indonesia

“…He also concludes that UAE Islamic banks are financially sound and healthy. Masood, Niazi, & Ahmad (2011) provided an analysis of the determinants of the growth of smaller Islamic banks. Using Z-score analysis to test the stability and the pooled ordinary least square (OLS) regression technique is also employed to examine the factors.…”

“…Therefore, the higher of cost-income ratio tends to inefficiency. For conventional bank, the response of BSI is negative and it supported by Čihák & Hesse (2010); Masood et al (2011); and Mirzaei (2010) whose stated that the increase of efficiency means the reduced levels of efficiency, so that the banks with higher costs to income ratios are further estimated to be less stable. It is assumed due to the decreased levels of efficiency would lead to disrupting the operational activities of conventional banks, so it will affect the banking stability is declined.…”

Perceptions on Islamic banking in the UK—Potentialities for empowerment, challenges and the role of scholars

“…Many academics have examined the phenomenon of Islamic banking by exploring sectoral growth, investigating selection criteria and evaluating institutional performance (Ford and Jones, 2001;Devlin, 2002a,b;Mathews et al, 2003;Wilson, 2007;Aldohni, 2008;Masood et al, 2009). While much of this literature analyses the attitudes of Muslims towards Islamic banking, it tends to do so from a purely financial perspective, emphasising quantifiable measures of performance and relegating theological debates and insights from critical perspectives to the margins (Dar, 2002;Wilson, 2003;Amin and Isa, 2008;Langah, 2008;Masood et al, 2011;Khan, 2010;. In particular, the role of scholars, of central importance in most aspects of Islamic life (Kamla et al, 2006) is largely ignored.…”

Capital Structure and Liquidity as Measures of Efficiency: The Case of Islamic Banks

“…The steady expansion of the number of Islamic banks in the world should induce us to improve our understanding of these institutions. Before the 2007 financial troubles, Islamic bank profits were increasing due to steady growth in the global economy (Masood, Niazi, & Ahmad, 2011).…”

“…Islamic banks have widened the scope of their products and services (Masood et al, 2011). Islamic banks have broadened their presence geographically, making the competitive landscape more competitive for all banking institutions.…”