Analysis of Islamic Bank's Performance and Strategy After Spin-off as Islamic Full-fledged Scheme in Indonesia

Siswantoro, Dodik

doi:10.1016/j.sbspro.2014.11.048

Cited by 25 publications

(25 citation statements)

References 10 publications

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“…At this backdrop, this study aims at identifying the incentives behind the conversion of conventional banks into Islamic banks using the “case study” approach. Such an approach provides noteworthy new angles for the existing Islamic banking argument, as the research on the conventional banks’ “spin-offs” issue is significantly rare, as argued by Siswantoro (2014, p. 42).…”

Section: Introductionmentioning

confidence: 99%

Incentives for conventional banks for the conversion into Islamic banks: evidence from Bangladesh

Suzuki

Uddin

Islam

2020

JIABR

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Purpose The skyrocketing rise of Islamic banking is noticeable in not only Islamic countries but also non-Islamic countries during the past few decades. Many conventional banks have started Islamic banking generally by maintaining separate branches/windows and occasionally by pursuing a complete conversion strategy. Following the global trend, two of the full-fledged Islamic banks adopted a conversion strategy consecutively in 2004 and 2008 in Bangladesh. The number of the conversion case is still limited. At this backdrop, this study aims to identify the incentives in the conversion strategy into Islamic banks. Design/methodology/approach Using the secondary data from the annual reports of the sample banks for both pre- and post-conversion periods, this study adopts the “case study” approach upon the comparison with the performance of conventional banks and other types of Islamic banks. Findings It is apparent that higher reserve requirement for conventional banks provides the incentive for the conversion into Islamic banks given with less reserve requirement. Under the protective regulatory framework, these converted Islamic banks may have enjoyed the rent for learning during the initial phase after the conversion, even though majority of the funds of these banks are collected from high-cost mudaraba time deposits. Basically, the credit strategy of the converted banks has been quite conservative, resulting in the concentrated portfolio selection on the asset-backed financing. However, the recent engagement of these banks in the Shari'ah-based participatory financing makes their performance a bit vulnerable. Research limitations/implications It is becoming difficult to justify a protective regulatory framework for incubating infant Islamic banks if the rent for learning given under the framework would not encourage them to challenge and absorb the risk and uncertainty associated with Shari’ah-based participatory financing. The current mode of profit–loss sharing (PLS) makes it difficult for the regulators to create an appropriate incentive for Islamic banks to challenge the equity-based financing. Originality/value The number of the conversion case is limited. Less has been done to investigate the reasons why the conventional banks opt for the conversion into Islamic banks, particularly in Bangladesh.

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Section: Introductionmentioning

confidence: 99%

Incentives for conventional banks for the conversion into Islamic banks: evidence from Bangladesh

Suzuki

Uddin

Islam

2020

JIABR

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“…The result shows that all the independent variables such as dummy variable of the spin-off, one-month time deposit margin, operational efficiency ratio (BOPO), and profitability ratio (ROA) had an impact on the growth of deposit funds on Islamic banking industry. Siswantoro (2014) analyze the performance and the strategy of Islamic bank after the spinoff decision, most Islamic banks that have converted in the full-pledge scheme could optimize some source of funding such as capital injection and increasing temporary investment deposit. Ramdani (2015) and Hamid (2015) found that there is a difference in profit between before and after spin-off policy.…”

Section: Literature Reviewmentioning

confidence: 99%

Does the spin-off policy can accelerate the deposit funds in the Indonesian Islamic banking industry?

Arif¹

2018

JBRMR

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The purpose of this paper is to analyze the impact of spin-off policy that based on Islamic Banking Act No. 21/2008 to the deposit fund growth of Islamic banking industry in Indonesia. This research used panel regression with fixed effect. The variable used in this paper is spin-off variable that used as a dummy variable, and also included the internal factor of industry such as deposit margin, and efficiency ratio (measured by BOPO). Besides the internal element, this research also added the external factor such as economic growth rate, and net interest margin from conventional banking. The result showed that the dummy spin-off variable, operational efficiency ratio (BOPO) and growth rate had an impact on the deposit funds in four Islamic banks. The implication of this result is spin-off policy had a good effect on the growth of deposit funds in Indonesian Islamic banking industry. Spin-off decision is one of the business strategies from Islamic banks and not the goal of Islamic banking industry.

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“…Increased rate of return occurs in spin-off companies, but in the long run, the increase is not significant. Siswantoro (2014) in his research on eight sharia banks that have spin-off said the addition of capital in sharia banks after separated from the parent company could accelerate the growth of Islamic banks. But effective management must support it.…”

Section: Literature Reviewmentioning

confidence: 99%

Spin Off Feasibility Study of Sharia Financing Unit: Study in Adira Finance

Wulandari¹,

Siregar²,

Tanjung

2018

Al-Iqtishad: Jurnal Ilmu Ekonomi Syariah

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The Financial Services Authorization (OJK) as the regulator of the finance industry has issued a policy set forth in the POJK. 28 / POJK.05 / 2014 which explains that multi-finance which has sharia portfolio as much as 50% from total business or five years from POJK is lawfully obliged to do spin-off sharia. With this policy, sharia business unit can be more focus on business development. Through this research will be analyze the feasibility of sharia financing business unit in fulfilling the aspect of separation of business unit (spin-off). Beside by observation, deep interview with Sharia Supervisory Board (DPS) and literature review, the research also use ARIMA and Double Smoothing Exponential to forecast market and financial aspect. Based on the research results sharia financing unit of Adira Finance has the ability to be spin off. But it should be noted from technology and human resources aspects.

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Analysis of Islamic Bank's Performance and Strategy After Spin-off as Islamic Full-fledged Scheme in Indonesia

Cited by 25 publications

References 10 publications

Incentives for conventional banks for the conversion into Islamic banks: evidence from Bangladesh

Incentives for conventional banks for the conversion into Islamic banks: evidence from Bangladesh

Does the spin-off policy can accelerate the deposit funds in the Indonesian Islamic banking industry?

Spin Off Feasibility Study of Sharia Financing Unit: Study in Adira Finance

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