BASRI, MOHD,FAIZAL (2016) THE PERFORMANCE OF MALAYSIAN ISLAMIC BANKING INDUSTRY AND THE IMPACT OF FOREIGN ISLAMIC BANKS. Doctoral thesis, Durham University.
|PDF - Accepted Version|
Malaysia’s determination to become a hub for Islamic banking in Southeast Asia has led the Central Bank of Malaysia to grant licenses to foreign Islamic banks to operate in the country. Due to the intense competition among Islamic banks, the introduction of more innovative products is projected to tap investment opportunities not only for Malaysia but also for the rapidly growing Southeast Asian region.
This research assesses the significance of Malaysian Islamic banking since the introduction of the first Islamic bank two decades ago, and evaluates the competition among the Islamic banks in the country.
The research evaluates the impact of foreign Islamic banks in Malaysia by measuring their contribution to the growth of the Malaysian Islamic banking industry. In relation to this, the study is designed to address three primary areas. First, to measure the performance of the Islamic banks in Malaysia by using financial ratios, data envelopment analysis (DEA), and the Malmquist Productivity Index. Second, to compare and evaluate the nature of competition and market structure of the Islamic banks in the country by employing the bank concentration ratio (CRk), Herfindahl-Hirschman Index (HHI), and the Panzar-Rosse (PR) model. Lastly, to validate the relationship between competition among Islamic banks in Malaysia and their financial performance.
The selected financial ratios indicated that domestic Islamic banks performed better during the 2005 to 2012 period in terms of profitability, but the foreign Islamic banks excelled in terms of liquidity, risk, and solvency ratios. DEA results showed that the domestic Islamic banks are considered more efficient with the majority of domestic Islamic banks outperforming the foreign Islamic banks. Banks like Maybank Islamic, CIMB Islamic, and Alliance Islamic are considered among the top performers for technical efficiency and scale efficiency. The study also found that based on the Malmquist Productivity Index, the least efficient banks based on DEA have improved in technical efficiency, technology, and total factor productivity (TFP). The study also found that between 2008 and 2012, the Malaysian Islamic banking industry operated in monopolistic competition conditions with a moderately concentrated market structure. The introduction of foreign Islamic banks caused the market structure to become more competitive and less concentrated by comparing the results that include foreign Islamic banks against results generated with a subsample of domestic Islamic banks only. BNM’s financial reform and liberalisation of financial system proved to induce competition making the financial system more resilient, competitive, and dynamic. The Islamic banks have recorded consistent increased annual performance with the under-performing Islamic banks catching up to the top performers.
|Item Type:||Thesis (Doctoral)|
|Award:||Doctor of Philosophy|
|Keywords:||Islamic bank, performance, efficiency, competition, market structure, DEA, Malmquist, HHI, CRk, Panzar-Rosse, Malaysia.|
|Faculty and Department:||Faculty of Social Sciences and Health > Economics, Finance and Business, School of|
|Copyright:||Copyright of this thesis is held by the author|
|Deposited On:||25 May 2016 08:38|