Islamic Bank Sustainability: An Econometric Approach
Teguh Budiman (),
Yayan Satyakti and
Erie Febrian ()
Asian Economic and Financial Review, 2021, vol. 11, issue 2, 141-159
Abstract:
This paper aims to assess the behavior of Islamic banks regarding their financial sustainability. It employed an econometric approach to estimate the financial sustainability of Islamic banks in ten predominantly Muslim countries. We derived financial sustainability indicators using the Bellman equation to demonstrate when Islamic banks achieved sustainability performance. We estimated the model with a refined Heckman selection through simulated maximum likelihood. Most of the results confirmed the findings of previous studies that financial sustainability of Islamic banks is influenced by ROA and efficiency. According to our estimation, we predicted that the majority of Islamic banks in ten Muslim countries failed to deliver Islamic moral economy. Islamic bank financing activities are still dominated by commercial financing rather than maqasid concepts. This paper explicitly shows a strong message for Islamic banks in Muslim countries to implement maqasid to improve the mandates of Islamic moral economy. We have presented a quantitative approach to produce robust estimations and predict bank sustainability according to the latest econometric methods.
Keywords: Bank behavior; Bellman optimization; Sustainable development; Maqasid sectors; Simulated maximum likelihood; Heckman selection bias. (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://archive.aessweb.com/index.php/5002/article/view/2059/3286 (application/pdf)
https://archive.aessweb.com/index.php/5002/article/view/2059/7360 (text/html)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:asi:aeafrj:v:11:y:2021:i:2:p:141-159:id:2059
Access Statistics for this article
More articles in Asian Economic and Financial Review from Asian Economic and Social Society
Bibliographic data for series maintained by Robert Allen ().