How should policymakers think about Islamic banks? Are they relics of a bygone era, propped up by subsidies and distorting financial-sector competition? Or, are they efficient and focused financial institutions that could, if unleashed, eventually dominate the retail financial landscape? A better understanding of these policy questions requires specific knowledge about the performance and the determinants of efficiency and profitability of Islamic banks. Indeed, the performance evaluation of Islamic banks is especially important today because of the globalization effect. The globalization phenomenon has put Islamic banks in fierce competition with traditional banks in well- developed financial markets. Further, some countries have completely transformed their banking system to the Islamic model. The existing research in Islamic banking and finance has focused primarily on the conceptual issues underlying interest-free financing (Ahmed 1981, Karsen 1982). These issues include the viability of Islamic banks and their ability to mobilize saving, pool risks and facilitates transactions. On the other hand, few studies had focussed on the policy implications of a financial system without interest payments [see for example, Khan (1986), Khan and Mirakhor (1987), and Bashir (1996)]. What is noteworthy is that empirical work on the performance evaluation of Islamic Banks is sparse. The lack of complete data impeded any comprehensive analysis of the experience of the last three decades. Whatever empirical work done so far has yielded inconclusive results [see, Bashir, Darrat and Suliman (1993), Bashir (1999)] This paper intends to analyze how bank characteristics and the overall financial environment affect the performance of Islamic banks. Specifically, the purpose of the study is to closely examine the relationships between profitability and the banking characteristics, after controlling for economic and financial structure indicators. The intention is to decide which among the potential determinants of performance appear to be important. By so doing, the paper extends the literature in several ways. First, utilizing bank level data, the paper provides summary statistics pertaining to Islamic banks' sizes and profitability. Second, the paper uses regression analysis to determine the underlying determinants of Islamic bank performance1. To this end, a comprehensive set of internal characteristics is examined as determinants of bank's net non-interest margin and profitability2. These internal characteristics include bank size, leverage, loans, short term funding, overhead and ownership. Third, while studying the relationship between banks' internal characteristics and performance, the impact of external factors, such as macroeconomic, regulatory and financial market environment are controlled. Among the external factors controlled, indeed foreign ownership, taxes, and the market capitalization were not been included in previous studies of Islamic banks. Moreover, some of the determinants were also interacted with the country's GDP per capita to check whether their effects on bank performance differ with different levels of income. Finally, by studying the connection between Islamic banks' performance and the efficiency indicators, this paper contributes to the research on the relationship between Islamic banks' performance and financial development. The paper is organized in four sections. Section 2 defines the variables, identifies the data sources, and highlights some important indicators in the sample. In section 3, we formulate the predicted model and discuss the possible links between bank performance and the set of internal and external indicators. Section 4 represents the empirical results, while the conclusions are stated in section,download.
Tidak ada komentar:
Posting Komentar