Raditya Sukmana

Dynamics of Islamic Financing in Malaysia: Causality and Innovation Accounting

The article evaluates dynamic interactions between Islamic financing and macroeconomic and financial variables for Malaysia using the Toda-Yamamoto (1995) causality test and innovation accounting approach. The results suggest strong causal influences of interest rate on Islamic financing but insignificant causal relations from real stock prices or real production to Islamic financing. Thus, while the results suggest that Islamic financing in Malaysia is resilient to boom/bust cycles of the stock market or fluctuations in real activity, Islamic banks under a dual-banking environment are not spared from fluctuations in interest rate or monetary conditions of the country.

An assessment of liquidity policies with respect to Islamic and conventional banks: A case study of Indonesia

Purpose - This paper aims to describe, compare and analyze liquidity policies from the central bank of Indonesia, particularly reserve requirements, with respect to Islamic as well as conventional banks. Design/methodology/approach - This paper provides some critical assessments on the policy applied by the central bank of Indonesia to both Islamic and conventional banks with regards to the reserve requirements applied in the Indonesian banking system. The analysis is based on whether both policies (Islamic and conventional) provide fairness to the banks as well as whether those policies support the real sector. In addition, the current global practice is also briefly described as a justification of the important and relevance of the current study. Findings - The authors find that the policy imposed on the Islamic banks is designed to boost the real sector, compared to that of conventional banks. For the policy with respect to Islamic banks, it recognizes the banks which have been doing well in their main role as financial intermediaries and “punishes” them when they fail to do so. This policy could not be found in the context of conventional banks. Practical implications - The authors argue that the current approach used for Islamic banks can also be adopted and imposed on conventional banks. This leads to a more stable financial system, since it supports the real sector. Originality/value - This paper is the first to analyze central bank policies with respect to banks (Islamic as well as conventional banks) in relation to their role as financial intermediaries.

Financing Channels and Monetary Policy in a Dual Banking System: Evidence from Islamic Banks in Indonesia

Using Indonesian Islamic banking data from 2003 to 2014, this article employs a panel regression methodology to investigate the responses of Islamic banks to changes in financing rates and monetary policy, which may differ depending on their characteristics. The results suggest that the financing rate has a negative impact on financing at Islamic banks, while bank‐specific characteristics have a positive influence on it. The size and amount of capital have a greater impact than liquidity on financing at Islamic banks. However, changes in monetary policy are insignificant on bank financing, which implies that the transmission of monetary policy through the Islamic segment of the banking sector is weak. Furthermore, the weak impact of monetary policy on bank financing can be explained by the dramatic expansion of Islamic banks during the sample period, which contributed to a substantial increase in deposit growth and a high liquidity position.

Islamic Financial Development as Efforts to Accelerate Economic Development and Poverty Alleviation

Economic development is one of the most important things in relation to the achievement of a successful economy in a country. One of the achievements of economic development is poverty alleviation. But, in the process of economic development, there are many imbalances. From the various types of inequality that occurred during the economic development process, it can be concluded that these imbalances occur because of the imbalance in the achievement of economic development, namely between the monetary and real sector. Nowadays, there are two concepts of economic development (capitalism and socialism economic). Since 1991, Islamic economy has been applied in Indonesia. It is not only about Islamic banking, but also Islamic finance, Islamic insurance, Islamic capital market, and Islamic development. The capitalism or socialism economy concept does not always offer the effective and efficient concept as expected in the development process. Then, what about an Islamic economy? Using an in-depth study literature method, it has been found that the Islamic financial system is able to answer the imbalance in the economic development process, particularly in terms of distribution that is comprehensive and consistent with the goals and objectives of the Millennium Development Goals (MDGs).