The Impact of Loan Portfolio Diversification on Tunisian Bank’s Profitability

Belguith, Houda; Bellouma, Meryem

doi:10.23956/ijermt.v6i6.242

Cited by 2 publications

(3 citation statements)

References 19 publications

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“…The implementation of diversification by banks requires monitoring costs in addition to profits. Banks will choose to diversify policy if the benefits of this policy outweigh the costs incurred ((Moudud-Ul-Huq et al, 2018); (Belguith & Bellouma, 2018)). Although the cost of monitoring will reduce bank profitability, at the same time, financing diversification accompanied by supervision and monitoring will help offset credit risk to be lower.…”

Section: Jan-12mentioning

confidence: 99%

“…Financing Diversification versus concentration of financing has become one of the most important issues to be discussed regarding bank stability ( (Belguith & Bellouma, 2018). Referring to the financing diversification theory, namely the classical financial theory shows that diversification must be a way to reduce credit risk ( (Diamond, 1984).…”

Section: Jan-12mentioning

confidence: 99%

“…When a diversification strategy increases strategic competitiveness, the company's performance will increase by competitors (Sulastri, 2013). Financing Diversification versus concentration of financing has become one of the most important issues to be discussed regarding bank stability ( (Belguith & Bellouma, 2018).…”

Section: Review Of Literaturementioning

confidence: 99%

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Financing Diversification and Profitability of Islamic Banking in Indonesia

Prastiwi

Anik

2021

JAP

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This study aims to determine the effect of Islamic bank financing diversification based on economic sectors and based on the type of use on profitability. This study uses financing data for Islamic Banks and Islamic Business Units in 2014-2018. The data in this study are the times series data. Data analyzed by used multiple linear regression analyses. This research provides that results that the HHI of diversification of Islamic bank financing based on the economic sector is positively related to increasing the profitability of Islamic banks. It means diversification of financing based on high economic sectors, has an impact on reducing the profitability of Islamic banks in Indonesia. While the HHI of diversification of financing by type of use give a significant influence in increasing the profitability of Islamic banks in a negative direction. If Islamic banking only focuses on channeling financing to the consumption sector, it can have an impact on decreasing profitability. So that Islamic banking needs to equalize the distribution of consumption to the working capital and investment sectors. The results of this study are interesting because it can be used as a reference for Islamic banking in determining the policy of diversification of financing to obtain high profitability with low risk.

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Section: Jan-12mentioning

confidence: 99%

Section: Jan-12mentioning

confidence: 99%

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Financing Diversification and Profitability of Islamic Banking in Indonesia

Prastiwi

Anik

2021

JAP

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Does credit diversification drive banks’ cost of intermediation? An empirical exploration

Nath,

Das

2023

CBSR

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The disparity between the interest rates on loans and deposits is a widely used indicator of how expensive financial intermediation is for a community. The nations which reflect lower intermediation costs have higher levels of banking penetration and financial development (Gupta et al., 2021). This research examines the impact of credit diversification strategy on cost of intermediation of the Indian commercial banks. Additionally, our study shows the moderating role of bank ownership in this nexus. The static and dynamic estimation of panel data of the banks during the period 2014 to 2020 are carried out to analyse this relationship. Our baseline results refute the findings of Bustaman et al. (2016) and Huynh and Dang (2021) and indicate that the more diversified a bank’s credit portfolio, the higher its cost of intermediation. Besides, the results reflect the effect of credit diversification in inflating the cost of intermediation is less severe for the banks with public ownership. Thus, this research emphasizes while promoting a diversified strategy, regulators and bank managers should carefully evaluate the positive impact of credit diversification on banks’ cost of intermediation with a caution that the positive impact is more severe for private sector banks.

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The Impact of Loan Portfolio Diversification on Tunisian Bank’s Profitability

Cited by 2 publications

References 19 publications

Financing Diversification and Profitability of Islamic Banking in Indonesia

Financing Diversification and Profitability of Islamic Banking in Indonesia

Does credit diversification drive banks’ cost of intermediation? An empirical exploration

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