Probing Risk of Default in the Market-Leading Islamic Banking Industry: During the Covid-19 Pandemic

• Main Authors: Mehreen, M., Marimuthu, M., Abdul Karim, S.A., Jan, A.
• Format: Article
• Published: Springer Science and Business Media Deutschland GmbH 2022
• Online Access: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85113435703&doi=10.1007%2f978-3-030-79610-5_4&partnerID=40&md5=4db61741762f9d00677b19135e884d0c; http://eprints.utp.edu.my/28849/
• Institution: Universiti Teknologi Petronas

This study aims to highlight the bankruptcy-related challenges and the reasons behind bank failures for the global Islamic banking industry, and to understand the expected impact of Covid-19 on the financial health of the Islamic banking industry. Moreover, the study shows that going bankrupt is a costly process that affects all stakeholders. Evidence shows that in the case of Islamic banking, a Shariah-based bankruptcy prediction model for apprehending the true bankruptcy prediction is over-sighted. It may further sour the existing uncertain situation for the Islamic banking industry with the additional unfavorable impact of Covid-19. As the subjected pandemic has badly affected the flow of the financial system worldwide, Islamic banking is not isolated. Therefore, efficient bankruptcy prediction models equipped with the latest micro and macro-economic factors are compulsory for the sustainability of the Islamic banking industry. © 2022, Institute of Technology PETRONAS Sdn Bhd.