Islamic Economics

Islamic Economics

A Survey of Factors Influencing Credit Risk in Islamic Banks Using The Generalized Method of Moments

Document Type : Original Article

Authors
mohammad nadiri 1
seid abbas mosavian 2
jalal naderi 3
1 faculty member at university of tehran
2 null
3 student at Tehran un
Abstract
The existence of rapid and dynamic changes in the global financial landscape has led to the banking industry pose many potential risks. Credit risk is one of the most important risks facing banks and is related to the ability of debtor to repay his debts. On the one hand it seems that Islamic banks face more credit risk due to their newness and less flexibility in using risk management tools, on the another hand, because of the different nature of their contracts and the rule of Sharia laws in their administration they can be better to manage this risk. In this study, the effect of bank specific factors such as management quality, capital adequacy, bank size and liquidity on credit risk in Islamic banks has been investigated. Also, in order to control the impact of macroeconomic factors on the results of the research, GDP growth rate, exchange rate and inflation rate are considered as control variables in the model. The research community consists of all banks that is administrated by the Islamic banking method; among them the top-hundred of banks of the Banker website ranking were selected as the sample in the period 2011-2016. In order to estimate the model the "Generalized Method of Moments" (GMM) has been used. The results of the model show that in Islamic banks there is a significant negative relationship between credit risk and management quality, capital adequacy, liquidity ratio and bank size.
Keywords
Bank Specific Factors
Credit Risk
Islamic Banks
Generalized Method of Moments
  1. احمدیان، اعظم، مهران کیانوند؛ «شناسایی عوامل مؤثر بر احتمال هجوم بانکی»؛ فصلنامه پژوهش‌ها و سیاست‌های اقتصادی، دوره22، ش71.
  2. بهتوئی، حسین و محمدرضا وطن‌پرست؛ «بررسی ارتباط بین تمرکز مالکیت بانک با کفایت سرمایه نقدینگی در بانک‌های پذیرفته‌شده در بورس اوراق بهادار تهران»؛ ماهنامه پژوهش ملل، دوره1، ش6، 1395.
    1. تقوی، مهدی و همکاران؛ «مدل ریسک اعتباری و رتبه‌بندی مـشـتـریـان حـقـوقـی بانک کشاورزی»؛ پژوهشنامه اقتصادی، دوره5، ش4، 1387.
  3. سالم، علی‌اصغر و سمیه خطیبی؛ «مقایسه کارایی بانک‌های اسلامی و بانک‌های سرمایه‌داری در بحران مالی و بحران اقتصادی»؛ فصلنامه پژوهش‌ها و سیاست‌های اقتصادی، ش75، 1394.
    1. صادقی شاهدانی، مهدی؛ محمدابراهیم آقابابایی؛ «تحلیل مقایسه‌ای ریسک اعتباری در بانکداری اسلامی و بانکداری متداول»؛ دو فصلنامه تحقیقات مالی اسلامی؛ سال اول؛ شماره اول؛ 1390.
    2. کریمی، داود؛ «تعیین اثر متغیرهای کلان اقتصادی و ویژگی‌های خاص بانکی بر ایجاد مطالبات غیر جاری در نظام بانکی ایران»، تهران، دانشگاه علامه طباطبایی، رساله دکتری، 1395.
    3. کمیجانی، اکبر و سامان فلاحی؛ «شناسایی عوامل درونی تأثیرگذار بر ریسک اعتباری بانک‌ها»؛ تحقیقات اقتصادی، دوره51، ش3؛ ۱۳95.
    4. متین، پدرام؛ «بررسی مدیریت ریسک در بانکداری اسلامی و بانکداری متعارف»؛ نخستین کنفرانس ملی توسعه مدیریت پولی و بانکی، تهران، مرکز همایش­های بین‌المللی صداوسیما، 1392.
    5. منظور، داوود و مهدی یادی‌پور؛ «کفایت سرمایه در بانکداری اسلامی»؛ فصلنامه علمی پژوهشی اقتصاد اسلامی، س۸، ش29؛ 1387.

10. موسویان، سیدعباس و همکاران؛ «مدیریت ریسک اعتباری در بانکداری اسلامی از طریق سواپ نکول اعتباری»؛ فصلنامه علمی پژوهشی اقتصاد اسلامی، س۹، ش33، 1388.

11. موسویان، سیدعباس و مجتبی کاوند؛ «مدیریت نقدینگی در بانکداری اسلامی»؛ معرفت اقتصادی، س۲، ش۱، 1389.

12. مهدوی، اصغرآقا و سیدمحمدمهدی موسوی؛ «ریسک اعتباری در بانکداری اسلامی و امکان استفاده از سواپ نکول اعتباری جهت کنترل آن»؛ دو فصلنامه علمی-پژوهشی جستارهای اقتصادی، س5؛ ش9؛ 1387.

13. نظرپور، محمدتقی و علی رضایی؛ «مدیریت ریسک اعتباری در بانکداری اسلامی با رویکرد بررسی عقود و الگوی پرداخت تسهیلات»؛ دو فصلنامه علمی پژوهشی تحقیقات مالی اسلامی؛ س2؛ ش۲؛ 1392.

  1. Abdul ManabNorlida & et al; “The Determinants of Credit Risk in Malaysia”; Procedia - Social and Behavioral Sciences, 172, 2015.
  2. Abdul-Rahman & et al; “An integrative approach for understanding Islamic home financing adoption in Malaysia”; International Journal of Bank Marketing, Vol. 31, No. 7, 2013.
  3. Abedifar, P & et al; “Risk in Islamic banking”; European Financial Review, Vol 17, Issue 6, 2013.
  4. Abid, Lobna & et al; “Macroeconomic and Bank-Specific Determinants of Household’s Non-Performing Loans in Tunisia: a Dynamic Panel Data”; Procedia Economics and Finance, vol 13, 2014.
  5. Aemiro, Tehulu Tilahun & Rafisa, Olana Dugasa; “Bank- Specific Determinants of Credit Risk: Empirical Evidence from Ethiopian Banks”; Finance and Accounting, Vol 5, No 7, 2014.
  6. Aldoseri, M; “Risk exposure of Islamic financial institutions: evidence from Gulf Co-operation Council countries”; A Thesis Submitted To The University Of Newcastle In Fulfilment Of The Requirements For The Degree Of Master Of Philosophy, 2012.
  7. Al-Suwaidi, Hassan; “A Study Differentiating Credit Risk Management Strategy between; Islamic and Non-Islamic Banks in UAE”; Submitted in Accordance with the Requirement for theDegree of Doctor of Philosophy London Metropolitan University, 2014.
  8. Al-Wesabi, Hamid A.H & NorHayati, Ahmad; “Credit risk of Islamic banks in GCC countries”; International Journal of Banking and Finance,Vol. 10, N 2, 2013.
  9. Baele, L. & et al; “Of religion and redemption: evidence from default on Islamic loans”; Journal of Banking and Finance, Vol. 44, 2014.
  10. Baltaghi, B. H; “Econometric Analysis of Panel Data”; 3nd edn , New York: john wily & sons,Inc., 2005.
  11. Baltagi; B. H; “Econometric Analysis of panel data”; Chichester: John Wiely&Sons, 2008.
  12. Blundell, R & et al; “Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator”; Institute for Fiscal Studies; WP 00/12; 2000.
  13. Bond, Stephen; “Dynamic panel models: a guide to micro data methods and practice”; Institute for Fiscal Studies, Department of Economics, UCL, CEMMAP (Microdata Methods and practice) Working Paper, CWPO9/02, 2002
  14. Boudriga, Abdelkader & et al “Banking Supervision and Nonperforming Loans: A Cross-Country Analysis”; Journal of Financial Economic Policy, Vol. 1, Issue: 4, 2009.
  15. Chamberlain, Trevor W & et al; “Credit Risk in Islamic and Conventional Banking”; International Atlantic Economic Society, V 24, 2018.
  16. Cihak, M & Hesse, H; “Islamic Banks and Financial Stability: An Empirical Analysis”; Washington: International Monetary Fund, IMF Working Paper, No. 08/16; 2008.
  17. Chong, BS &  Liu, MH;  “Islamic banking: Interest-free or interest-based?”; Pacific-Basin Finance Journal, Vol 17, Issue 1, 2009.
  18. Dridi, Jemma & Hasan, Maher; “The Effects of the Global Crisison Islamic and Conventional Banks A Comparative Study”; Journal of International Commerce; Economics and Policy, Vol. 2, No. 2, 2011.
  19. El Garay, Mohamed Ali; “Credi risk in Islamic banking and finance”; Islamic Economic Studies, Vol. 10, No. 2, 2003.
  20. El-Hawary, D. & et al; “Diversity in the regulation of Islamic financial institutions”; The Quarterly Review of Economics and Finance, Vol46, 2007.
  21. Errico, M. & et al; “Islamic banking: issues in prudential regulations and supervision; International Monetary Fund”; international monetary fund, wp/98/30, 1998.
  22. Frankie, ChauChul woo & Han, ShimengShi; “Dynamics and determinants of credit risk discovery: Evidence from CDS and stock markets”; International Review of Financial Analysis, Vol.55,  2018.
  23. Franklin, Amuakwa-Mensah & et al; “Re-examining the Determinants of NonPerforming Loans in Ghana’s Banking Industry: Role of the 2007–2009 Financial Crisis”; Journal of African Business, vol.18, 2017.
  24. Hasan, M. & Dridi, J; “The Effects of the Global Crisis on Islamic and Conventional Banks”; Washington: International Monetary Fund; Working Paper, vol 18, No 3, 2010.
  25. Hsiao, Cheng; “Analysis of panel data”; 2nd edition, the press syndicate of the University of Cambridge, 2003.
  26. Hull, J & White, A; “Valuing Credit Default Swaps I: No Counterparty Default Risk”; Journal of Derivatives, Vol 8, 1, 2000.
  27. Kabir, Nurul Md & et al; “Comparative credit risk in Islamic and conventional bank”; Pacific-Basin Finance Journal, Vol 34, 2015.
  28. Kabir, M.N. & Worthington, A.C; “Credit risk in Islamic financial products”; Contemporary Issues in Islamic Finance: Principles, Progress, and Prospects, 2014.
  29. Khan, T & Ahmed, H; “Risk Management: An Analysis of issues in Islamic Financial Industry”; Islamic Research and Training Institute (IRTI), No5, 2001.
  30. Koulafetis, Panayiota; “Modern Credit Risk Management Theory and Practice”; Palgrave Macmillan,Vol.1, No.137, 2017.
  31. Kwashie, Garr David; “Determinants of Credit Risk in the Banking Industry of Ghana”; Developing Country Studies, Vol.3, No.11, 2003.
  32. Makri, Vasiliki & et al; “Determinants of Non-Performing Loans: The Case of Eurozone”; Panoeconomicus, vol 2, 2014.
  33. Najuna, MismanFaridah & et al; “Islamic Banks Credit Risk: A Panel study”; Procedia Economics and Finance, vol 31, 2015.
  34. Nevine Sobhy Abdel Megeid; “Liquidity risk management: conventional versus Islamic banking system in Egypt”; Journal of Islamic Accounting and Business Research, Vol. 8, Iss 1, 2017.
  35. Nikhat, Fatima; “Capital Adequacy: A Financial Soundness Indicator for Banks”; Global Journal of Finance and Management, Vol 6, No 8 , 2014.
  36. Nor Hayati, Ahmad & Mohamed, Ariff; “Multy-Country Study Of Bank Credit Risk Determinants”; The International Journal of Banking and Finance, Vol. 5, No 1, 2007.
  37. Pestova, Anna & Mamonov, Mikhail; “Macroeconomic and bank-specific determinants of credit risk: evidence from Russia”; Economics Education and Research Consortium, Vol. 4, No. 4, 2014.
  38. Rahman, Ataur & et al; “Impact of Financial Ratios on Non-Performing Loans of Publicly Traded Commercial Banks in Bangladesh”; International Journal of Financial Research, Vol. 8, No. 1, 2017.
  39. Rajha, Khaled Subhi; “Determinants of Non-Performing Loans: Evidence from the Jordanian Banking Sector”; Journal of Finance and Bank Management, Vol 4, No 1, 2016.
  40. Safiullah, Md & Abul Shamsuddin; “Risk in Islamic banking and corporate governance”; Pacific-Basin Finance Journal, vol 47, 2018.
  41. Said, Ali; “Risks and Efficiency in the Islamic Banking Systems: The Case of Selected Islamic Banks in MENA Region”; International Journal of Economics and Financial Issues, Vol. 3, No. 1, 2013.
  42. Salimi Far, M & Dehnavi, J; “Comparing the Environmental Kuznets Curve in OECD countries and developing countries: analysis based on panel data”; Journal of Knowledge and Development, in Issue, vol 29, 2009.
  43. ShahrulNizam, Ahmadand & NorHayati, Ahmad; “Key Factors Influencing Credit Risk Of Islamic Bank: A Malasyan Case”; The Journal of Muamalat and Islamic Finance Research,ISSN 1823-0754, 2004.
  44. Siddiqui, A; “Financial contracts, risk and performance of Islamic banking”; Managerial Finance, Vol. 34, 2008.
  45. Srairi, S; “A comparison of the profitability of Islamic and conventional banks: The case of GCC countries”; Bankers; Markets & Investors, vol 98, 2009.
  46. Stephen, Kwame & et al; “Credit Risk Research: Review and Agenda”; Emerging Markets Finance and Trade, vol 54, 2018.
  47. Sundararajan, V & Errico, L; “Islamic Financial Institutions and products in the global financial system: Key issues in risk management and challenges ahead”; International monetary fund, WP 192, 2002.
  48. Waei, brorheem & et al; “Bank Specific and Macroeconomics Dynamic Determinants of Credit Risk in Islamic Banks and Conventional Banks”; International Journal of Economics and FinancialIssues, 2015.
  49. Witzany, Jiri; “Credit Risk Management Pricing, Measurement and Modeling; book”; Faculty of Finance and Accounting, Springer International Publishing AG, 2017.
  50. Zorana, Agić & Zoran, Jeremić; “Macroeconomic and Specific Banking Determinants of Nonperforming loans in Bosnia and Herzegovina”; Industri ja, Vol.46, No.18, 2018.