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Measuring Cyclical Behavior of Islamic and Conventional Financing: Evidence from Indonesian Dual Banking System قياس سلوك التمويل الإسلامي والتمويل التقليدي: دليل من النظام المصرفي الإندونيسي المزدوج

Author

Listed:
  • Arif Widodo

    (Management trainee, Indonesia Financial Services Authority)

Abstract

A thorough analysis about the financial cycle encompassing several financial variables, most importantly including credit, from a conventional perspective has been carried out by previous studies. These studies revealed that the composite cycle is of paramount importance to issue a proper policy. The boom-and-bust of the cycle must be considered in order to achieve the macro prudential objective of curbing excessive credit growth and preventing the build-up of systemic risk. To that end, in the context of the dual banking system where Islamic and conventional banks operate side by side under similar financial circumstances, it is crucial to assess whether the Islamic financing cycle behaves as its conventional counterpart. Given the fact that most of the literature has focused on the cyclical behavior from a conventional perspective, this paper assesses the characteristics of both Islamic and conventional financing cycles. This analysis will help in framing adequate policy implementation of macro prudential policies for the dual banking system. Following the methodology employed by Drehmann, Borio, and Tsatsaronis (2012) in forming the common cycle, this paper concludes that Islamic banks functioning under the same environment as their conventional counterparts, appear to have a similar peak-and-trough cycle but different amplitude. This means that macro prudential policy, particularly countercyclical capital buffer (CCB) policy is deemed crucial to be adopted in Islamic banking as set out in the Islamic Financial Services Board document, IFSB-15 (IFSB, 2013). تم إجراء تحليل شامل للدورة المالية التي تم إنشاؤها عبر تضمين العديد من المتغيرات المالية، في الكثير من الدراسات السابقة التي تناولت التمويل التقليدي. لقد تم الكشف عن أن الدورة المركبة ذات أهمية قصوى لإصدار سياسة مناسبة، من خلال النظر في الطفرة والكساد لتحقيق هدف الاقتصاد الكلي الذي يتمثل في كبح جماح زيادة التمويل المفرط ومنع تراكم المخاطر. ولتحقيق هذه الغاية في سياق النظام المصرفي المزدوج حيث تعمل المصارف الإسلامية في ظل ظروف مالية مماثلة، بات من الضروري تقييم ما إذا كانت دورة التمويل الإسلامي تسير وفق ما عليه الحال في التمويل التقليدي وذلك بالنظر إلى حقيقة أن معظم الدراسات السابقة ركزت على السلوك الدوري من منظور تقليدي. تهدف هذه الورقة إلى تقييم خصائص دورات التمويل الإسلامي والتقليدي بهدف المساعدة في وضع إطار لتحليل التنفيذ المناسب لسياسات الحوكمة الكلية للنظام المصرفي المزدوج. واتباع المنهجية المتبعة في ورقة Drehmann, Borio, and Tsatsaronis (2012) في تشكيل الدورة المشتركة. وتخلص الورقة إلى أن المصارف الإسلامية التي عملت في ظل بيئة مماثلة لديها ذروة ونهاية متشابهة، مع اختلاف السعة كما هو في الجانب التقليدي. مما يعني أن سياسة التحوط الكلية لا سيما سياسة استبعاد رأس المال من مواجهة الدورات الاقتصادية تعتبر حاسمة ومقبولة ليتم اعتمادها في المصرفية الإسلامية كما هو موضح في وثيقة مجلس الخدمات المالية الإسلامية (IFSB-15, 2013).

Suggested Citation

  • Arif Widodo, 2020. "Measuring Cyclical Behavior of Islamic and Conventional Financing: Evidence from Indonesian Dual Banking System قياس سلوك التمويل الإسلامي والتمويل التقليدي: دليل من النظام المصرفي الإندونيسي المزدوج," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 173-192, July.
    • Handle: RePEc:abd:kauiea:v:33:y:2020:i:2:no:13:p:173-192
    DOI: 10.4197/Islec.33-2.13
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    References listed on IDEAS

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    More about this item

    Keywords

    Credit cycle; Countercyclical Buffer; Dual Banking; IFSB-15. دورة الائتمان، مواجهة التقلبات الدورية، المصرفية المزدوجة، مجلس الخدمات المالية الإسلامية.;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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