The Impact of Crisis and Macroeconomic Variables Towards Islamic Banking Deposits

American Journal of Applied Sciences, Vol. 8, No. 12, pp.1413-1418, 2011

6 Pages Posted: 28 Feb 2012

See all articles by Muhamad Abduh

Muhamad Abduh

International Islamic University of Malaysia (IIUM)

Mohd Azmi Omar

Islamic Research and Training Institute; International Islamic University of Malaysia (IIUM) - Faculty of Economic and Management Sciences; INCEIF

Jarita Duasa

International Islamic University of Malaysia (IIUM) - Faculty of Economic and Management Sciences

Date Written: May 31, 2011

Abstract

Problem statement: The nature of Islamic banks is different from conventional banks which may lead to a different deposit behavior of their depositors. This study aims to analyze the dynamic effects of interest and profit rate changes, production level, inflation and financial crisis towards the fluctuation of total deposits in Malaysian Islamic banks. Approach: Using monthly data from January 2000 to December 2010, cointegration test and vector error correction model were utilized to uncover the dynamic relationship between macroeconomic variables and crisis with total deposit of Islamic banking. Results: The results show that changes in interest and profit rate as well as production growth has no significant effects. Meanwhile, inflation has negative effect on total deposits of Islamic banks which reflects the changes on depositors’ consumption pattern during the recession. Interestingly, financial crisis is positively affecting total deposits in Islamic banks. Conclusion: This study provides evidence of general consumer sentiment and deposit behavior. It indicates that in general, due to the 1997/1998 financial crisis experience, bank depositors have trusted Islamic banking to be more resilient in facing financial crisis and hence, inflow of deposits to Islamic banks was happened during 2007/2008 financial crisis.

Keywords: Financial crisis, Islamic banking deposits, Macroeconomic variables

JEL Classification: C01, G21

Suggested Citation

Abduh, Muhamad and Omar, Mohd Azmi and Omar, Mohd Azmi and Duasa, Jarita, The Impact of Crisis and Macroeconomic Variables Towards Islamic Banking Deposits (May 31, 2011). American Journal of Applied Sciences, Vol. 8, No. 12, pp.1413-1418, 2011, Available at SSRN: https://ssrn.com/abstract=2012370

Muhamad Abduh (Contact Author)

International Islamic University of Malaysia (IIUM) ( email )

Jalan Gombak
Kuala Lumpur, 53100
Malaysia

Mohd Azmi Omar

Islamic Research and Training Institute ( email )

Saudi Arabia

HOME PAGE: http://www.irti.org

International Islamic University of Malaysia (IIUM) - Faculty of Economic and Management Sciences ( email )

P.O. Box 10
Kuala Lumpur, 53100
Malaysia

INCEIF ( email )

Lorong Universiti A
Kuala Lumpur
Kuala Lumpur, WY WP 59100
Malaysia

Jarita Duasa

International Islamic University of Malaysia (IIUM) - Faculty of Economic and Management Sciences ( email )

P.O. Box 10
Kuala Lumpur, 53100
Malaysia

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,011
Abstract Views
3,453
rank
28,470
PlumX Metrics