What Determines The Financing Supply of Islamic Banks? A Multicountry Study

Shakeel Riaz and Dr. Talat Hussain
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Shakeel Riaz: PhD Scholar, Institute of Islamic Banking and Finance, University of Management and Technology, Lahore, Pakistan
Dr. Talat Hussain: Assistant Professor, Institute of Islamic Banking and Finance, University of Management and Technology, Lahore, Pakistan

International Journal of Economics and Financial Research, 2018, vol. 4, issue 1, 22-29

Abstract: Smooth functioning a bank depends on the stability of stream of returns that it gets from its financing decision. This study is an attempt to showcase the reason for idling or shortage of funds and the factors for the case of Islamic banking. This effort will determine the strategy which can boost the financing in the economy, for this, this study has used the panel data of full-fledged Islamic banks from countries Pakistan and Malaysia, spanning to several years and based on several banks. Based on the analysis of internal and external factors of Islamic banks, it can be seen that increase in the market rate leads to decrease in demand of financing while the increase in deposits and equity do not show a proportional increase in financing which hints that there is excess liquidity available in the Islamic banks. On the positive side, it is evident that increase in the economic activity boosts the demand for Islamic financing.

Keywords: Islamic banking; Financing; Excess liquidity (search for similar items in EconPapers)
Date: 2018
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