Factors influencing the financial performance of selected Islamic Banks in Malaysia and Indonesia / Fitrah Rahmatika Muslih
These days, banking industry mostly uses a dual system, conventional banking and Islamic banking. Although Islamic banking is still relatively new compared to conventional banks, Islamic banking is recently growing rapidly throughout the world. In particularly, Malaysia and Indonesia are two coun...
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| Format: | Thesis |
| Published: |
2023
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| Subjects: | |
| Online Access: | http://studentsrepo.um.edu.my/14414/1/Fitrah.pdf http://studentsrepo.um.edu.my/14414/ |
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| Institution: | Universiti Malaya |
| Summary: | These days, banking industry mostly uses a dual system, conventional banking and
Islamic banking. Although Islamic banking is still relatively new compared to
conventional banks, Islamic banking is recently growing rapidly throughout the world. In
particularly, Malaysia and Indonesia are two countries with high development of Islamic
banking compared to other countries in ASEAN. In fact, Malaysia and Indonesia were
ranked as the first and the second out of 50 countries on the Islamic Finance Country
Index (IFCI) in 2020. Therefore, this study was conducted to compare the factors that
influence the financial performance of Islamic banking in Malaysia and Indonesia. The
research objectives of this study are to investigate how the comparison of the effect of
financial ratios, macroeconomics, and Shariah screening on the financial performance of
Islamic banking in Malaysia and Indonesia and to identify which would be the most
influential factor that affects the financial performance of Islamic banking in Malaysia
and Indonesia.
This study utilizes the secondary data collected from the annual financial reports of
ten Malaysian Islamic banks and ten Indonesian Islamic banks from 2015 to 2020. This
study categorized the explanatory variables into financial ratios, macroeconomics, and
Shariah screening. The financial ratio factors include Capital Adequacy Ratio (CAR),
Non-Performing Financing (NPF), and Financing to Deposit Ratio (FDR);
macroeconomics factors include inflation, Gross Domestic Product (GDP), and exchange
rate, while Shariah screening factors include Islamic investment, Islamic income, and
Profit-sharing ratio. In order to achieve the research objectives of this study, the researcher uses a panel
data multiple linear regression model to test the effect of independent variables on
dependent variables. Results have shown that for Malaysian Islamic banking’s
performance, there are three variables significantly influence the financial performance
of Malaysian Islamic banks: Capital Adequacy Ratio (CAR) of financial ratio factors,
Gross Domestic Product (GDP) of the macroeconomic factors, and Profit-sharing of
Shariah screening factors. In comparison to Indonesian Islamic banks, this study finds
that seven independent variables have a significant impact to the financial performance
of Islamic banks in Indonesia: Capital Adequacy Ratio (CAR), Non-Performing
Financing (NPF), and Financing to Deposit Ratio (FDR) of financial ratio factors; Gross
Domestic Product (GDP) and Exchange rate of the macroeconomic factors; and Islamic
investment and Islamic income of Shariah screening factors.
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