Nexus between risk sharing vs non-risk sharing financing and economic growth of Bangladesh

Abstract

and finally, Quoc Cuong Phan and Taha Bhatti for the excellent research assistance in managing some of the papers in this issue. 646 MF 44,6 regarding the effect of these two variables to risk exposure and efficacy of both Islamic and conventional banking systems. In order to add more value to current literature with reference to the differences between Islamic and conventional banking systems, Bougatef and Korbi aimed to study the factors that explain intermediation margins under both Islamic and conventional banks operating in the Middle East and North Africa. By using the dynamic panel modeling approach, they revealed different determinants of net profit margins under these two systems. Utilizing various methodologies including Markowitz's (1952) portfolio optimization, visual data representations and the classic Fama-Macbeth (1973) two-pass procedure regressions, Cheong investigated the ability of the Islamic Gold Dinar to hedge against foreign exchange market volatility. His findings documented a new hedging instrument to diversify investors' currency portfolios. In the later article, Chowdhury, Akbar and Mohammad examined the relationship between Islamic financing principles and economic growth in Bangladesh using auto regressive distributive lags. Having considered all annual reports of Islamic banks in Bangladesh, this group of authors shed light on how the economic growth responds to the risk sharing and non-risk sharing instruments. In the wake of the GFC, predicting financial distress in banking systems has been increasingly more critical in order to prevent future economic downturns. In their paper, Halteh and his co-authors; Kumar and Gepp aimed to forecast the failure by using cutting-edge stochastic models including decision trees, stochastic gradient boosting and random forests to study 101 international publicly listed Islamic banks. Their findings add value to the literature on the issue of Islamic banking and predicting financial distress. To examine the differences in investors' perceptions concerning the response to the issuance of Sukuk and conventional bonds, Hassan, Ahmed and Rayfield observed significantly negative abnormal returns before and after the announcement date of Sukuk issuance. By utilizing linear and logistic regression models, they found an interesting connection: first, between firms' characteristics and these abnormal returns; and second, issuers' preferences between issuing Sukuk and conventional bonds. Mahmood, Gan and Nguyen, by utilizing the two-step system GMM estimation technique on 55 full-fledged Islamic banks from 11 different countries, have analyzed various factors at both firm-specific and macroeconomic levels, in order to explore their impacts on maturity transformation risk. This paper makes an important contribution to studying maturity transformation risk which is considered one of the major causes of the global financial crisis. Md Zabri and Mohammed examined the acceptability of the Cash Waqf-financial cooperative-Musharakah Mutanaqisah (MM) home financing...

Islamic Financial Depth, Financial Intermediation, and Sustainable Economic Growth: ARDL Approach

“…The first approach of studying the phenomenon of Islamic finance and economic growth is based on the 'Schumpeterian supply-leading' approach. Chowdhury et al (2018) and Abd. Majid and Kassim (2015) suggested a positive and linear relationship between Islamic banking and economic growth in a Malaysian economic setting.…”

“…Studies in favor of Islamic finance and economic growth have been conducted in different countries around the globe. For instance, Jouini (2016) endorsed this relationship in Saudi Arabia, Abduh and Omar (2012), Anwar et al (2020) in Indonesia, Kassim (2016) in Malaysia, Chowdhury et al (2018) in Bangladesh, Goaied and Sassi (2010) in the Middle East and North Africa (MENA) region, Lebdaoui and Wild (2016) Southeast Asia, and Abedifar et al (2016) in 22 Muslim countries. Nevertheless, the findings become inconclusive when other authors explored the insignificance of the relationship between Islamic finance and economic growth in UAE, Bangladesh, Malaysia, Turkey, and MENA countries (Adnan Hye and Islam 2013;Hachicha and Amar 2015;Kar et al 2011;Yüksel and Canöz 2017;Zarrouk et al 2017).…”

Islamic bank contribution to Indonesian economic growth

“…This includes contributing to financing morally acceptable projects, encouraging lending, promoting financial stability and stimulating saving (Imam and Kpodar, 2016). It is supported by Islamic banking-sharing instruments, which are predominantly equity-based and directly pursue the bi-directional causal relationship with economic growth (Chowdhury et al, 2018;Kassim, 2016). Islamic banks promote economic activities, including offering capital ventures in the real economy, which is more efficient compared to pure lending.…”

“…According to previous studies, Islamic banks have positive impacts on economic growth. For instance, it has an economic contribution through the transmission of deposit to financing and investment in Bangladesh (Chowdhury et al, 2018), GCC and East Asia countries (Grassa and Gazdar, 2014;Mohd. Yusof and Bahlous, 2013), Indonesia (Abduh and Omar, 2012), Malaysia (Abd.…”

The Relationship Between Capital Structure and Performance in Islamic Rural Bank

“…During this time, capital structure theory is used, such as packing order theory (Modigliani & Miller, 1963), pecking order theory (pecking order theory) in the analysis of capital structure developed by (Myers, 1984). The capital structure of the Islamic banks are broadly divided into two types, namely based financing income (profit and musharaka) and financing of non-PLS (murabaha, salam, istishna, and ijarah) (Chowdhury, Akbar, & Shoyeb, 2018;Wahyudi et al 2019). The principles of non-PLS in Islamic banking allows the expansion of the , muajjal, Istishna', Ijarah, and Murabaha (Chowdhury et al 2018).…”