Formulating withdrawal risk and bankruptcy risk in Islamic banking
Purpose – The purpose of this paper is to formulate both withdrawal risk and bankruptcy risk to mitigate the risks and to find the equilibrium area of revenue sharing to depositors. Taking the case of the Indonesian Islamic banking industry, this work might benefit the Islamic banks, banking regulators and all stakeholders to manage the risks and maintain the robust development of the industry. Design/methodology/approach – First, the application of revenue sharing ratio in Islamic banks is studied. Withdrawal risk might happen because of the displaced commercial risk and bankruptcy occurs when the banks fail to manage such withdrawal risk. Referring to that, by using a mathematical approach, the formulas of withdrawal risk and bankruptcy risk are created with some underlying scenarios. Finally, mathematical formula and three dimensions area of the equilibrium revenue sharing ratio are developed. Findings – The paper generates the financial mathematical formulas to assess the vulnerable and invulnerable conditions of the withdrawal risk and the bankruptcy and solvency conditions of the bankruptcy risk to be used by decision makers to mitigate the risks. The ultimate output of the paper is the equilibrium area of the revenue sharing ratio, which locates Islamic banks in a proper condition of no withdrawal risk and bankruptcy risk. Originality/value – To the best of the author's knowledge, this is the first paper trying to analyze the issues under the Indonesian case.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 5 (2012)
Issue (Month): 1 (April)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://emeraldgrouppublishing.com/products/journals/journals.htm?id=imefm Email:
When requesting a correction, please mention this item's handle: RePEc:eme:imefpp:v:5:y:2012:i:1:p:63-77. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.