Effect of interest rate on bank deposits: Evidences from Islamic and non-Islamic economies

Mushtaq, Saba; Siddiqui, Danish Ahmed

doi:10.1016/j.fbj.2017.01.002

Cited by 61 publications

(56 citation statements)

References 6 publications

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“…The power of faith is the reason behind the abandonment of the interest rate. Mushtaq and Siddiqui (2017) discovered that most of the depositors in Islamic banking do not really care about increases and decreases in the interest rate. Islamic bank depositors will keep depositing their money as they believe in Islamic law.…”

Section: The Results Of Vecm and The Granger Causality Testmentioning

confidence: 99%

“…Interest rates do not have any significant effect on Islamic bank deposits, as has been found by several researchers (see, for example, Tariq and Masih 2016;Kassim et al 2009;Sukmana and Kassim 2010;Hassan 2016). Others have found positive relations between bank savings and interest rates (see, for example, Solarin et al 2018;Loayza and Shankar 2000;Athukorala and Tsai 2003;Ojeaga et al 2016;Ostadi and Sarlak 2014;Eriemo 2014;Siaw and Lawer 2015;Mushtaq and Siddiqui 2017). In their findings, Mushtaq and Siddiqui (2017) concluded that interest rates, which are forbidden in Islam, have significant positive impacts on bank deposits in non-Muslim countries both in the long-term and short-term; however, in Muslim countries, because of the religious restriction on interest rates, both in the long-term and short-term, people do not care about increases or decreases in interest rates while depositing money in banks.…”

Section: Literature Reviewmentioning

confidence: 99%

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Macroeconomic Determinants of Islamic Banking Products in Indonesia

Setyowati

2019

Economies

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The purpose of the study was to investigate which factors determine saving and financing in Islamic banks in Indonesia by using Gregory–Hansen cointegration, vector error correction mode (VECM), Granger causality, and the impulse response function. The results disclose the existence of a long-running cointegrating relationship with a structural break in the deposit and financing case to the consumer price index, industrial production, interest rate, exchange rate, and Jakarta Islamic Index. Most of the structural breaks appeared in January 2006 and April 2007 for both deposit and financing, revealing the first stage of the financial crisis. Any short-term deviation between deposit and financing will give rise to a stable relationship in the long term. In the short-term, there is bidirectional causality between deposits and industrial production and between the consumer price index and financing. This finding shows that real activity, as measured by industrial production, is a highly determinant factor of Islamic bank deposits, while inflation, as measured by the customer price index, is the determinant factor of Islamic bank financing. Our results also suggest that a mix of dynamic behaviors from both Islamic bank savings and financing was revealed in response to the shock of the macroeconomic variable, giving better insight for the government and stakeholders into Indonesian Islamic banking.

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Section: The Results Of Vecm and The Granger Causality Testmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Macroeconomic Determinants of Islamic Banking Products in Indonesia

Setyowati

2019

Economies

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“…The study recommended a need of training for customer service of agent and importance of services to improve customer satisfaction. Nonetheless, the findings of the study by (Viswanadham, Tadele, and Bonso, 2015) [38] which was conducted to find the impact of location and information technology on deposit mobilization of private commercial banks in Ethiopia showed that introduction of ATM as banking services had no strong influence on the increase of banks' deposit.…”

Section: 5electronic Bankingmentioning

confidence: 98%

The Influence of Bank Related Variables on Deposit Mobilization: An Analysis of Private Commercial Banks in Myanmar

Tun¹,

Alrajawy²,

Nusari³

2019

Res. Bus.

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Deposit mobilization is a crucial for the banks and economic development. However, a certain low level of deposit is a concern for the economy. Apart from macroeconomic policies, the bank should find their own possible strategies to increase level of deposit. Therefore, the purpose of this study is to analyze the effect of bank specific factors such as bank asset, number of Auto Teller Machine (ATM) and number of Point of Sales (POS) terminal on deposits mobilization of private commercial banks in Myanmar.

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“…The relationship between interest rates and savings (deposit) still exist a debatable issue examined the effect of interest rate on banks' deposit for non-Islamic and Islamic economies [13]. The result showed that real interest rate has positive significant impact on bank deposits of non-Islamic countries Islamic countries whereas interest rate has positive insignificant impact on deposit of banks in Islamic countries.…”

Section: Interest Rate and Inflation On Savingsmentioning

confidence: 99%

The Implications of Interest Rates on Private Saving with Reference to Myanmar

Tun*¹,

Alrajawy²,

Bhaumik³

2020

IJRTE

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The private saving is one of the fundamentals for economic development and growth of the country. Thus, the main purpose of this paper is to analyze the effect of interest rates on private saving in Myanmar over the period from fiscal year 2013-14 Q1 to 2018 Q2. This study investigates the private saving of Myanmar’s banking sector which includes twenty seven private commercial banks, four State-owned banks and thirteen foreign bank branches. The quarterly data are obtained from secondary data sources collected from quarterly Financial Statistics Bulletin and annual reports of Central Bank of Myanmar, Statistical Year Books and Selected Monthly Economic Indicators published by CSO, Myanmar, as well as websites from commercial banks to investigate the effect of domestic interest rates on private saving. Inferential analysis including multiple regression analysis and correlation analysis as well as descriptive analysis are applied to examine the effect of domestic interest rates on private saving with the use of Statistical Package for Social Sciences (SPSS) software (version 25). The findings of the study reveal that all independent variables except from Treasury bill rate have significant impact on the savings while inflation and fixed deposit rate have adversely impact on savings. Among all independent variables, saving deposit rate is the most influent variable on attracting private saving. Therefore, the study concludes that policies for ensuring to adopt flexible interest rates structures and for maintaining reasonable inflation rate depending upon the macroeconomic conditions of the economy would be critical to mobilize private saving in Myanmar.

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Effect of interest rate on bank deposits: Evidences from Islamic and non-Islamic economies

Cited by 61 publications

References 6 publications

Macroeconomic Determinants of Islamic Banking Products in Indonesia

Macroeconomic Determinants of Islamic Banking Products in Indonesia

The Influence of Bank Related Variables on Deposit Mobilization: An Analysis of Private Commercial Banks in Myanmar

The Implications of Interest Rates on Private Saving with Reference to Myanmar

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