Are The Profit Rates of the Islamic Investment Deposit Accounts Truly Performance Based? A Case Study of Malaysia
In this study we were motivated to ascertain whether the profit rates of the investment deposit accounts based on the profit and loss sharing contracts offered by the Islamic banks are truly based on the performance of the underlying assets or otherwise, by taking Malaysia as our case study. Given the facts that Islamic investment deposits are interest free in nature and that they are supposedly used in real economic activities, one would naturally expect that their returns are directly related to the actual performance of the investment activities undertaken by the Islamic banks. However, this notion stands to be statistically validated since the likelihood of Islamic finance, operating in the same financial markets of the conventional finance, to be influenced by the regulatory intervention and interest rate regimes is equally high. Using time series techniques, we have tried to establish whether there were any significant cointegration among profit rates of the Islamic investment deposit accounts and the selected interest rate regimes. Our test results reveal that, instead, they are heavily influenced by the interest rate regimes.
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- Serhan Cevik & Joshua Charap, 2015.
"The Behavior of Conventional and Islamic Bank Deposit Returns in Malaysia and Turkey,"
International Journal of Economics and Financial Issues,
Econjournals, vol. 5(1), pages 111-124.
- Joshua Charap & Serhan Cevik, 2011. "The Behavior of Conventional and Islamic Bank Deposit Returns in Malaysia and Turkey," IMF Working Papers 11/156, International Monetary Fund.
- Zulkhibri, Muhamed, 2012. "Policy rate pass-through and the adjustment of retail interest rates: Empirical evidence from Malaysian financial institutions," Journal of Asian Economics, Elsevier, vol. 23(4), pages 409-422.
- Chong, Beng Soon & Liu, Ming-Hua, 2009. "Islamic banking: Interest-free or interest-based?," Pacific-Basin Finance Journal, Elsevier, vol. 17(1), pages 125-144, January. Full references (including those not matched with items on IDEAS)
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