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Do macroeconomic factors affect the credit risk of islamic banks? evidence from Malaysia

Author

Listed:
  • Sapian, Safeza
  • Masih, Mansur

Abstract

This paper makes an attempt to investigate whether the macroeconomic factors contribute to the credit risk exposure and non-performing financing (NPF) of Islamic banks. Malaysia is taken as a case study. The standard time series techniques are used to analyze the issue. The variables that have been chosen for the study are gross domestic product (GDP), Non-Performing Financing rate, Islamic financing rate (IFR) and unemployment rate (UMPT). The findings tend to indicate that Islamic Financing rate (IFR) stands out as the only factor that had a significant impact on the credit risk exposure and non-performing financing as well as the performance of Islamic banks in the context of Malaysia.

Suggested Citation

  • Sapian, Safeza & Masih, Mansur, 2018. "Do macroeconomic factors affect the credit risk of islamic banks? evidence from Malaysia," MPRA Paper 100719, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:100719
    as

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    File URL: https://mpra.ub.uni-muenchen.de/100719/1/MPRA_paper_100719.pdf
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    References listed on IDEAS

    as
    1. Ivan Baboucek & Martin Jancar, 2005. "Effects of Macroeconomic Shocks to the Quality of the Aggregate Loan Portfolio," Working Papers 2005/01, Czech National Bank.
    2. Masih, A. Mansur M. & Albinali, Khaled & DeMello, Lurion, 2010. "Price dynamics of natural gas and the regional methanol markets," Energy Policy, Elsevier, vol. 38(3), pages 1372-1378, March.
    3. Ali, Asghar & Daly, Kevin, 2010. "Macroeconomic determinants of credit risk: Recent evidence from a cross country study," International Review of Financial Analysis, Elsevier, vol. 19(3), pages 165-171, June.
    4. A. Mansur M. Masih & Trent Winduss, 2006. "Who Leads the Australian Interest Rates in the Short and Long Run? An Application of Long Run Structural Modelling," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 9(01), pages 1-24.
    5. Asli Demirgüç-Kunt & Enrica Detragiache, 1998. "The Determinants of Banking Crises in Developing and Developed Countries," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 81-109, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Islamic Banks; Credit Risk; Non-performing Financing; Time Series Analysis; Malaysia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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